[VIDEO] How Would an Irrevocable Life Insurance Trust Benefit You?

For every Life Insurance policy, there is an owner (which is usually the insured) and a beneficiary. At death, the proceeds are included in the owner’s estate for Estate Tax consideration.

If proceeds pass to the spouse, they could become estate taxable in the spouse’s estate. The Life Insurance Trust is irrevocable and non-amendable, and thus is an entity unto itself.

There are several benefits to an Irrevocable Life Insurance Trust. The trustee of the trust can control the distributions from the trust. And it provides added liquidity without having to liquidate assets for the survivor.

When transferring a policy into an Irrevocable Life Insurance Trust, the insured must survive for three years. If not the policy value will be included in the estate. Most Irrevocable Life Insurance Trusts are funded by annual gifts for gift tax purposes. The Irrevocable Life Insurance Trust can purchase assets from the estate or loan money to the estate.

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The views expressed in this commentary are subject to change based on market and other conditions. This video may contain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Malcolm Ethridge, CFP® is the Managing Partner of Capital Area Planning Group based in Washington, DC. He is also the Managing Partner of Capital Area Tax Consultants. 

Malcolm’s areas of expertise include retirement planning, investment portfolio development, tax planning, insurance, equity compensation and other executive benefits. 

 Disclosures:

The information provided is for educational and informational purposes only, does not constitute investment advice, and should not be relied upon as such. Be sure to consult with your legal advisors before taking any action that could have tax and legal consequences.

Investments in securities and insurance products are:

NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE