Planning Opportunities With Irrevocable Life Insurance Trusts

Patrick J.Lannon (White & Case, LLP, Miami, Florida) has published his article, Planning Opportunities With Irrevocable LifeInsurance Trusts, in the May 2007 edition of Estate Planning.

Here is the introduction:

With current law allowing everyindividual to pass $2 million on death free from federal estate tax, and withmany states assessing no state estate tax at all, planners might be tempted tode-emphasize estate tax planning for all but the very wealthy. However, even individuals with comparativelymodest wealth often carry significant life insurance. Proceeds of a life insurance policy owned by theinsured at the time of death are subject to estate tax, so that without properplanning, significant (and unnecessary) estate taxed may be assessed.

A properly formed and administeredirrevocable life insurance trust (ILIT) will allow life insurance proceeds topass to the children of the insured free from gift, estate, and income taxes.In certain circumstances, life insurance proceeds may also pass to theinsured’s grandchildren free from generation-skipping transfer (GST) taxes. Anindividual who is willing to give up control and access to policy cash value inreturn for estate tax avoidance should consider whether an ILIT would be anappropriate part of his or her estate plan.