$1,000,000 SPWL for 80 Y.o. Female

[GonnaFlyNow]

thank u padthai.
that makes sense.
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ok. let;s assume an estate large enough to owe taxes. If the policy is owned by the mom, the estate will then owe taxes on the proceeds, as they are added to the value of the estate.

If the policy is owned by a trust, the estate owes no taxes on the death benefit.

i understand that point padthai, but gifting the 1m into a trust also reduces the estate tax exclusion so theres no net estate tax savings.

getting 700k of income tax free gains and estate tax free gains makes sense.

but some of these guys were thinking that gifting the million in premium into the life ins trust would (in and of itself) reduce the estate tax which is totally wrong.

 

[insuranceexec]

I'm still curious about the $6M table 2 rating on an 84-year-old...

I apologize I did not see your question.

The premium was $5,388,085.93 guaranteed DB of 6,000,000.00 on a 84 yr old rated table 2.

With North American their table 2 is a 40% rate up on the COI. Had the contract been issued standard the premium would have been in the neighborhood of 5 million. Good question.

 

[GonnaFlyNow]

I apologize I did not see your question.

The premium was $5,388,085.93 guaranteed DB of 6,000,000.00 on a 84 yr old rated table 2.

With North American their table 2 is a 40% rate up on the COI. Had the contract been issued standard the premium would have been in the neighborhood of 5 million. Good question.

OK. now i'm realy confused.

i can understand turning 1m in premium to 1.7m of death benefit. But why turn 5.3 (or even 5.0) million in premium into 6m of death benefit?

 

[padthaiforlunch]

Look at it this way. Estate value $10M. Gotta pay taxes on that. Take out a $1M life policy to pay for it.

Now the estate owes tax on $11M, unless policy owned by trust.

thank u padthai.
that makes sense.
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i understand that point padthai, but gifting the 1m into a trust also reduces the estate tax exclusion so theres no net estate tax savings.

getting 700k of income tax free gains and estate tax free gains makes sense.

but some of these guys were thinking that gifting the million in premium into the life ins trust would (in and of itself) reduce the estate tax which is totally wrong.

 

[insuranceexec]

Look at it this way. Estate value $10M. Gotta pay taxes on that. Take out a $1M life policy to pay for it.

Now the estate owes tax on $11M, unless policy owned by trust.

Very good, Pad. The policy I was referencing was used to create an ILIT.

 

[GonnaFlyNow]

pad and exec,

can one of you explain to me how putting $1m in an ILIT or putting $5.3m in an ILIT reduces the estate taxes?

I understand that it reduces the size of the estate, but it also reduces the estate tax exclusion before money is being gifted into the ILIT. Am I wrong?

am I typing clearly enough for you, pad?

 

[insuranceexec]

A good read.

Minimizing Federal Estate Taxes: Advantages of an Irrevocable Life Insurance Trust | Articles & Archives | Article Archive | Life Insurance Selling Magazine - The Magazine for Top Life, Health & Financial Services Producers

 

[dgoldenz]

Maybe I'm confused.....if $5.3 million was gifted into an ILIT to pay for the policy, wouldn't they have to pay the tax on all money gifted after the exclusion, putting it over $6M total cost? Also, how does a $5M standard premium become $5.3M with a 40% premium increase? Seems like that would be closer to $7M in premium....

Either way, nice payday. Commission on that must have been ~$800k-1M. Compulife shows the target premium on that policy to be $684k at standard.

 

[Franz Kafka]

pad and exec,

can one of you explain to me how putting $1m in an ILIT or putting $5.3m in an ILIT reduces the estate taxes?

I understand that it reduces the size of the estate, but it also reduces the estate tax exclusion before money is being gifted into the ILIT. Am I wrong?

am I typing clearly enough for you, pad?

Estate tax exclusion is different from lifetime gift tax exemption. Let's say estate tax exclusion by the time the insured dies is at 1M (currently 3.5 this year) and let's say the insured will have 3M worth of estate. If the policy and other assets are owned by revocable AB living trust it will increase the estate tax exclusion up to 2M (AB). The insured can give away 1M now into an irrevocable life insurance trust before she passes away using lifetime gift tax exemption. If she dies with 2M the estate will owe no estate tax. A lot of times ILIT is used to provide estate tax for the amount above estate tax exclusion due to illiquidity of the estate (e.g. business assets and real estate properties).

 

[insuranceexec]

Maybe I'm confused.....if $5.3 million was gifted into an ILIT to pay for the policy, wouldn't they have to pay the tax on all money gifted after the exclusion, putting it over $6M total cost? Also, how does a $5M standard premium become $5.3M with a 40% premium increase? Seems like that would be closer to $7M in premium....

Either way, nice payday. Commission on that must have been ~$800k-1M. Compulife shows the target premium on that policy to be $684k at standard.

Very good question. Run the number that I gave you and see if you come out with the same thing. I personally use Winflexweb, but that should not make a difference.