The Benefits Of An Irrevocable Insurance Trusts

Irrevocable life insurance trust are a popular tool in the estate planner’s arsenal because they allow the full value of the insurance to pass free of taxes. When the trust is fully funded during the life of the insured, the intended beneficiaries are offered excellent security without having to worry about probate or other complicating factors.

  Life insurance trust are also an excellent way to provide for the transfer of shares between partners in a small business at death. Each partner sets up an insurance trust that will buy the shares upon the death of the other partner. The trust will then take the shares, instead of the surviving partner personally, which prevents the taxable estate of the survivor from increasing. The above uses just scratch the surface of the potential for this type of trust which should be explored in more depth if it looks like a client may benefit from the arrangement.

See John P. Dedon, Buy-Sell Arrangements and Irrevocable Insurance Trusts, National Law Review, July 15, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.