A businessman in his 50s sees you to discuss his estate planning. Divorced, with three children, he has a net worth of $10 million, with the bulk of it locked up in his business and real estate. His financial advisor recommended a multimillion-dollar death benefit life insurance policy with a hefty annual premium to address his potential estate tax bill. The life insurance policy will accumulate significant cash value. While he may never need the policy cash value, in order to alleviate the client’s fears, the financial advisor has indicated that he can access the cash value if needed. Alternatively, the financial advisor views this policy as a supplemental retirement plan. Of course, in order to access cash value, the client must own the policy, which is anathema to attorneys. Our playbook requires that the policy be owned by a traditional life insurance trust, with the client relinquishing access to cash value in order to exclude the insurance from his estate. Any right he retains to cash value causes inclusion of the policy in his estate under Internal Revenue Code (IRC) Section 2042.
But can a trust be created by the client and provide access to cash value, yet still have the insurance death benefit excluded from the client’s estate using a self-settled life insurance trust?
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
