Intelligent Family Protection

Advanced Life Insurance Concepts and Income Solutions

Aside from giving your family what it needs when you pass, life insurance also presents some ways to ensure your family receives the maximum and can also present a less-stress alternative when it comes to asset liquidation.

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Estate Planning and Life Insurance

Estate planning means preparing your estate to be passed on to your heirs and properly distributing the assets of your estate. When you pass away, your estate is likely subject to federal estate taxes and state inheritance taxes, which are normally due within nine months of your passing.

Life insurance plays a unique role in estate planning by bringing the liquidity needed to handle estate taxes and other expenses to avoid rapid liquidation sales of assets that are not very liquid. Some expenses needing payment upon your death might include:

  • Federal estate taxes
  • State inheritance taxes
  • Probate fees
  • Legal and admin fees
  • Debts
  • Funeral costs

With a life insurance policy, you pre-pay much less now than you would in the future through a funded irrevocable life insurance trust (ILIT).

Federal income tax laws are complex and subject to change. Neither Nationwide nor its representatives give legal or tax advice. Please consult your attorney or tax advisor for answers to specific questions.

What Is an Irrevocable Life Insurance Trust?

When someone passes, if they own their life insurance policy, it can be taxed in his or her estate. Thus, you would want to create a separate entity to own the insurance. The best way to do this is through an Irrevocable Life Insurance Trust that will act as owner of the policy, paying the monthly premiums. Done correctly, you will bypass estate inclusion at the passing of whoever is insured. It’s the best method for creating the largest amount of liquidity when taxes or debts must be paid.

How it works is the grantor of the trust will send gifts to the ILIT annually for payment of premiums. These gifts must qualify under the Annual Gift Exclusion. You accomplish this by writing yearly letters to beneficiaries of the trust from the trustee in which you give them a date range where they can withdraw each gift. If that date range passes or the beneficiaries reject the gift in writing, the Trustee can then utilize the gift for payment of premiums and other things permissible in the Trust document.

If you’d like an agent to discuss with you other ways in which you can save a lot of money with life insurance strategies, please request a quote and we will be in contact with you.

As your personal situations change (i.e., marriage, birth of a child or job promotion), so will your life insurance needs. Care should be taken to ensure this product is suitable for your long-term life insurance needs. You should weigh any associated costs before making a purchase. Life
insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and has additional charges for riders that customize a policy to fit your individual needs.

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