Life Insurance Trusts ?

[Tim Resnick]

Been doing a little research on Life Insurance Trusts.

ANYWAY, some attorney writing an article seems to suggest that writing a life insurance policy without working with an estate planning attorney) is akin to Mal-practice (for the agent).

What's the truth?

Me thinks this attorney (who happens to also hold a CLU) is looking to push more business towards attorney's (and line his own pocket).

Is it really necessary to recommend clients seek an attorney before writing a life insurance policy?

Perhaps when the policy is written an the Trust is the beneficiary, i would think an estate attorney would be necessary, but otherwise, i would say NO!

Thoughts/ Opinions?

 

[STIBROKER]

Is it really necessary to recommend clients seek an attorney before writing a life insurance policy?

Perhaps when the policy is written an the Trust is the beneficiary, i would think an estate attorney would be necessary, but otherwise, i would say NO!

Thoughts/ Opinions?

It is my understanding that in doing a irrevocable insurance trust the Trust has to be set up before the insurance is written because if you do it the other way then you have a 5 year period were the death benefit is still taxable.......

 

[DHK]

It's bull****.

There is a 3-year transfer rule for transferring a policy into an ILIT (Individual life insurance trust) where if you die within 3 years, the policy reverts to being outside of the trust.

But which comes first? The policy or the trust? I think it makes little sense to buy a trust first, until you determine underwriting and budget.

John Savage said this in one of my video recordings:
"I understand the three years. But he could die in 3 years if we DON'T do it."

It's as though "You can't do that!" Baloney. Do it anyway. True, you could set up the trust and then have the trust buy the insurance... but that's still doing it backwards, because insurability is a bigger factor than the cost of establishing the trust.

Watch from this point:

 

[Tahoe Ray]

Only matters if the trust is irrevocable. Most people dont need an irrevocable trust unless they have an estate planning issue (worth more than 12 million or so) so that is largely B.S.

If it is irrevocable, it is better for the trust to purchase the policy since it will avoid the look back issue but this is a small percentage of cases.

 

[Tahoe Ray]

It is my understanding that in doing a irrevocable insurance trust the Trust has to be set up before the insurance is written because if you do it the other way then you have a 5 year period were the death benefit is still taxable.......

Not necessarily taxable....just included in the estate.

 

[Tim Resnick]

Here's the article.

(i'm a newby but thought it was interesting)

Link

.

 

[Allen Trent]

It is my understanding that in doing a irrevocable insurance trust the Trust has to be set up before the insurance is written because if you do it the other way then you have a 5 year period were the death benefit is still taxable.......

The death benefit wouldnt be taxable because of the 3 year lookback. The death benefit would merely be included in the deceased persons estate if they died within 3 years of transferring the policy ownership to the ILIT. But even in that case, you are currently talking about a couples entire value of their entire assets & the life death benefit would have to exceed the $22.4M. So, in most cases, unless the person is already wealthy or the policy has a huge face amount to push them over the 22.4M, it is a non-issue & many carriers have 3-4 year term riders to add on to policies to make the total payout larger to cover the added estate taxes if the 3 year look back came into play.

 

[Allen Trent]

Been doing a little research on Life Insurance Trusts.

ANYWAY, some attorney writing an article seems to suggest that writing a life insurance policy without working with an estate planning attorney) is akin to Mal-practice (for the agent).

I would refer many people after writing the life insurance to their attorney to confirm the best way to list beneficiaries. Most scenarios are pretty straight forward to be the spouse as primary and the children (or living trust) as contingent. However, in 2nd marriages, special needs children & maybe some wayward adult children, suggesting people get legal advice to see if the standard beneficiary designation is sufficient is a good way to protect yourself from an E&O. I have seen agents & brokerage reps completely disinherit adult children by failing to realize a current marriage of clients is a 2nd marriage where both spouses have their own adult children from prior marriages. Naming the current spouse to receive all the funds of Life insurance or retirement funds likely is not what the client wants to happen. They should likely have a trust as a beneficiary so it can properly spell out if the current spouse gets anything, or if the current spouse receives income for life & then the balance to the insureds children like would be done in a QTIP trust I believe.

 

[BeeSelective]

Make it a Crummey Trust