Simplify Your Life After the New Tax Act and Terminate that Irrevocable Life Insurance Trust

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Is It Time to Terminate Your Life Insurance Trust?

As a result of the Tax Cuts and Jobs Act of 2017, the federal estate tax exemption is now $11,180,000 per person and $22,360,000 per married couple. How many of you purchased life insurance in a trust in the last 15-20 years when the federal estate tax exemption was $600,000 or even at $2,000,000? If you fall into that category, then you are like me. As the federal estate tax exemption has increased, I started asking myself; ‘Why am I going through all of this work to maintain the insurance trust? Especially since the insurance proceeds would not cause any taxation in my estate, because of the high federal estate tax exemption.’ In addition, I realized that I was inconveniencing my sister as Trustee by asking her to deposit my check for the premium into the insurance trust and then write a check from the trust to the insurance company to pay the policy as well as preparing the Crummey withdrawal notices.

How Does The Process of Paying My Insurance Premiums Change?

A few years ago, I became aware of an opportunity under the Pennsylvania Uniform Trust Act, either to modify or to terminate, an insurance trust without court approval. I decided to utilize this opportunity to terminate my life insurance trust and return the ownership of my life insurance to myself so that I had full autonomy over the life insurance and did not have to inconvenience my sister anymore. It was also crucial that I have full trust in my wife, Beth, of over 20 years and knew that she would make sure that our wishes were honored with the life insurance proceeds if she survives me. So, my insurance premium payments are much simpler each year without the involvement of the insurance trust.

Am I Able To Help You With Your Needs?

As I started to share this story with my clients, they became interested in this idea as well. Please do not hesitate to send me an email or give me a call at 412-521-2732 x211 if you are interested in terminating your insurance trust and making your life simpler.

Life Insurance: Is It Right for Your Estate Plan?

Insurance salesmen are often maligned and are frequently the butt of some pretty bad jokes. At the risk of being categorized with those poor men and women, I’ll tell you that I don’t hesitate to recommend life insurance to many of my own clients after evaluating their estate planning needs. Why? Because when it is appropriate and structured properly, life insurance has a number of benefits that make it an excellent and possibly the best wealth transfer strategy.

If you read the earlier chapters, you learned that legislative changes since 2009 mean that federal estate tax is an issue for far fewer taxpayers than in the past. The IRS wasn’t feeling guilty about charging estate tax on your assets, they just gave more people a reason to worry about a completely different problem called federal income tax. Chapter 12 of Retire Secure! delves into some techniques that show how life insurance can be used to help minimize the damage to the estate caused by income taxes at death. It also discusses how life insurance can be used to provide liquidity for a number of estate settlement needs, and also how it can be used to benefit the estate if there is a disabled beneficiary. While life insurance can be extremely beneficial it is important to remember that in situations where taxes and other estate needs aren’t a concern, the cost of the life insurance – especially for a senior citizen – might not be worth it.
Life Insurance, Retire Secure, James Lange

In earlier chapters, there are several references to the possibility that Congress may eliminate the benefits of the Stretch IRA. Chapter 12 introduces some new ideas regarding the inclusion of a Charitable Remainder Unitrust (CRUT) in certain estate plans. How do you think your children would react if you named a charitable trust as the sole beneficiary of your retirement plan? They might react very favorably when they find out that, in the long run, they could end up with a lot more money.

This is a very complicated estate planning technique that is not appropriate for everyone. Under the right set of circumstances, though, life insurance can be a very effective addition to an estate plan – especially if the owner of the IRA has always supported charities. Would you like to endow a chair at your local university or symphony orchestra, or perhaps provide financial support for your favorite hospital or religious organization long after your death? Read Chapter 12 to learn the basics of this strategy, and how life insurance can play a key role.

Stop back soon for an update on some really big news about the possible death of the Stretch IRA.

Jim

Jim Lange, Retirement and Estate Planning A nationally recognized IRA, Roth IRA conversion, and 401(k) expert, he is a regular speaker to both consumers and professional organizations. Jim is the creator of the Lange Cascading Beneficiary Plan™, a benchmark in retirement planning with the flexibility and control it offers the surviving spouse, and the founder of The Roth IRA Institute, created to train and educate financial advisors.

Jim’s strategies have been endorsed by The Wall Street Journal (33 times), Newsweek, Money Magazine, Smart Money, Reader’s Digest, Bottom Line, and Kiplinger’s. His articles have appeared in Bottom Line, Trusts and Estates Magazine, Financial Planning, The Tax Adviser, Journal of Retirement Planning, and The Pennsylvania Lawyer magazine.

Jim is the best-selling author of Retire Secure! (Wiley, 2006 and 2009), endorsed by Charles Schwab, Larry King, Ed Slott, Jane Bryant Quinn, Roger Ibbotson and The Roth Revolution, Pay Taxes Once and Never Again endorsed by Ed Slott, Natalie Choate and Bob Keebler.

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