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Florida experts weigh in on irrevocable life insurance trusts

When you’re planning your estate, it’s understandable that you’re going to want to work out the best situation for your loved ones after you’re gone. This will, of course, include a plan that will keep as much of your assets as possible exempt from Florida estate tax. Many people plan their estates to include an irrevocable life insurance trust, which protects a certain amount of the estate from taxes, as well as paying estate taxes with the proceeds from the trust.

We’ve recently discussed federal tax law changes, which exempt tax from estates worth less than $5.25 million or $10.50 million per married couple. Many people who own irrevocable life insurance trusts now wonder if this provision is still necessary.

Tax experts say it may be in your best interests to dissolve such a trust if your net worth dips, if your estate shrinks, if your insurance premiums are higher than your trust earnings, or even in the case of divorce.

But there could still be valid reasons to keep the trust. A Florida estate planning attorney says that it’s uncertain whether the tax laws could change again in the future, and having a life insurance trust could be a safe bet. As the trust owner and beneficiary, if your net worth is above $5.25 or is expected to be worth that much by the end of your life, you would be saving your heirs from being responsible for the tax on your surplus assets.

The tax law changes have left many people scrambling to find out how the changes can affect their estates and their loved ones. To help you come up with the best decision for your individual situation, it’s recommended to speak with your estate planning attorney.

Source: Palm Beach Daily News, “Should you end your irrevocable life insurance trust?” Gail Liberman, June 23, 2013



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