Life Insurance trust

Hi,

Could any one of the forum guys here tell me what a Life Insurance Trust is?

I've come across such a term in one of the 24X7 forums..but not being able to understand it fully!

Regards,
Jeff:skeptical:
 
uh....more information?

What do you mean? There are different trusts set up for different types of outcomes, with insurance used to fund them.
 
Hi,

Could any one of the forum guys here tell me what a Life Insurance Trust is?

I've come across such a term in one of the 24X7 forums..but not being able to understand it fully!

Regards,
Jeff:skeptical:

The most common form is called an "Irrevocable Life Insurance Trust" (or "ILIT").

If set up correctly, it can own a life insurance contract from which the death benefit proceeds are NOT included in your taxable estate at death.

Hope that helps.
 
The most common form is called an "Irrevocable Life Insurance Trust" (or "ILIT").

If set up correctly, it can own a life insurance contract from which the death benefit proceeds are NOT included in your taxable estate at death.

Hope that helps.

Death Benefit Proceeds are most likely not taxable anyways, regardless if they are in a trust or not.
 
Sorry, incorrect. Read more carefully.

Death benefits are normally free of INCOME tax. There is an exception if premium payments were tax deducted.

They are included in your estate for estate tax purposes.

Well ya, if your using your life insurance premium as a tax write off then yes, I can see how you could get taxed, most people who purchase life insurance use after tax money... hence no tax liability to the Beneficiary of the Death Benefit.

Thats why I said "most likely" not going to pay taxes...
 
Well ya, if your using your life insurance premium as a tax write off then yes, I can see how you could get taxed, most people who purchase life insurance use after tax money... hence no tax liability to the Beneficiary of the Death Benefit.

Thats why I said "most likely" not going to pay taxes...

You're not understanding.

There are two separate tax issues;

Federal Income Tax
Federal Estate Tax
 
Another interesting point is the ILIT will pay the premiums. The insured can donate up to $11,000 per child to the trust under IRS gifting guidelines. Note: check with a CPA, which I am not.
 
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