Defer Estate Tax With A Life Insurance Trust
While life insurance is intended to provide a prop to your family in the event of your premature death, sometimes it can cause a bit of problem. Though income tax does not apply to a life-insurance payout, estate tax does and it could take away a really big chunk of your insurance amount. One of the options to avoid this is by creating a life insurance trust.
If you have a substantial policy that could push the value of your estate above the tax threshold (currently $2 million) you could be in trouble. One way out is to create an irrevocable life-insurance trust, a legal entity that will own the policy while you’re alive. The trust will pay the proceeds to the beneficiaries you’ve designated after you die. A trust works with both cash-value (whole, universal) and term policies.
If you enjoyed this article, please bookmark it at del.icio.us »