Ho-Hum Insurance Trusts

Katt, Peter C.
October 1995
Journal of Financial Planning;Oct95, Vol. 8 Issue 4, p149
Academic Journal
In this article the author focuses on ho hum, irrevocable trusts funded with life insurance. There are two potential problems associated with this area and this article devote its attention on these two situations. The first potential problem is the failure to consider the use of an irrevocable trust when large amounts of term insurance are purchased by young, high-earning professionals using life insurance to protect their families. The second potential problem involves older clients with significant wealth, who, to avoid using an irrevocable trust, have their children jointly own their life insurance. The unified estate and gift tax is a tax imposed on the transfer of assets, either during lifetime or following death. Because of the unlimited marital deduction, the estate tax generally isn't due until the second death for married couples. Planning to limit the growth of, or even reduce, asset values subject to the estate and gift tax is a sophisticated mini-industry. Clients who buy life insurance to protect their families typically aren't directly concerned with estate taxes. Yet some thought should be given to the estate-tax implications of being insured for large amounts.


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