Understanding Life Insurance Familiar

1. What does a life insurance trust?

A trust, irrevable life insurance gives you more control over your insurance policies and the money paid for it. It also allows you to reduce or even eliminate ground tax, so more of your estate you can go to their loved ones.

2. What are the basic taxes?

Capital taxes are different and additionally the cost of succession and final income tax for income owed in the year he dies. Federal and state taxes are expensive (historically 45-55%) and must be paid after nine months in cash, normally after his death. Because only few states that have money, it is often necessary to liquidate assets to pay those taxes. But if you plan ahead, you will be reduced or even eliminated.

3. Who paid for land tax?

Your real estate must pay federal land taxes if your net worth is if you die more than the amount of the lease by the Congress at that time. In 2011 and 2012, the federal exemption is $ 5 million (adjusted for inflation in 2012) and the tax rate is 35%. If Congress is not effective before the end of 2012, in 2013 the exemption will be $ 1 million and the maximum tax rate will be 55%. Some states have their own death or inheritance tax so that their assets can be exempt from federal taxes and still have to pay state taxes.

4. What is my network worth?

To determine the current nett value, add your assets and then subtract your debts. Insurances in which you have some "incidents of property" included in your taxable estate. These include measures that may be borrowed, assigned or canceled, or are likely to revoke an order, or the recipient may appoint or change the order. You can see how to pay the life insurance to increase the size of its assets and the amount of land taxes.

5. How to reduce an insurance agency's basic taxes?

The insurance trust has insurance for you. Since you do not personally own insurance or have any incident of property, it will not be included in your condition - so your basic tax will be reduced. (There is a rule of three years for the existing policies, which are explained below.)

With the exemption $ 5 million, you can not need savings now. But it is important to understand how this works because the exemption as 2013 is reduced so quickly, and the value of the net assets can substantially increase at the time of his death.

Please say with a combined net worth of $ 3 million $ 1 million of which insurance is life are married and you and your spouse die if the exemption from land tax is $ 1 million and the maximum rate is tax is 55%. A reversal of tax planning in a trust or life can protect up to $ 2 million in land tax. But their properties would have to pay $ 1 million additional $ 435,000 in land tax. With a confidence, insurance, millions of dollars would not be in their inheritance. That would save your family $ 435,000 in real estate taxes.

6. What if my heritage is greater than that?

If your assets still have to pay ground tax after your insurance is transferred to a trust, you can reduce your tax cost of goods - buy additional life insurance, have confidence. Here are three very good reasons to do this:

If the trust purchase insurance, will not be included in your estate. Thus, revenue that is subject to real estate taxes or income, even tax-free goods.

Insurance proceeds are directly after death. Therefore, their assets will not be paid to pay land taxes.

Life insurance can be a cost-effective way to pay land taxes and other expenses. So you can leave more to their loved ones.

7. How does an irrevocable insurance trust work?

An insurance trust consists of three components. The grantor is the person who creates the trust is you. The successful administrator manages the trust. And the trust beneficiaries will get you names to get the trusteeship after his death.

The trustee purchase with you an insurance as insured, and the trust as the owner and (usually) benefited. If the insurance is paid after his death, increase the trustee funds, provided land taxes and / or other expenses (including debts, legal expenses, inheritance and income taxes that can be repatriated in IRAs and other supplies), and Distribute them to the trust beneficiaries as they have learned.

8. Can I be my own trustee?

Not if you have the tax advantages that we want to explain. Some people appoint their spouses and / or adult children as trustees, but often do not have enough time or experience. Many people choose a corporate trustee (bank or a trust company) because they have experience with these familiar. A corporate trustee will ensure that the trust is managed properly and that the insurance premiums are promptly paid.

9. Why not appoint someone other than the owner of my insurance?

If someone else, like your spouse or adult children, has a policy in your life and dies first, the present value / termination will be in the taxable estate. That does not help much.

But more importantly, if someone loses the political, loses control. This person can change the recipient, take the present value or even terminate the contract, leave it uninsured. You can trust this person now, but could later have problems. The policy could even be established to satisfy the creditors of the other person. An insurance trust is safer; It allows you to reduce your basic taxes and keep control.

10. How can I get control of an insurance trust?

With an insurance trust, the confidence of the policy. The trustee you should select, follow the instructions in your trust. And with his insurance trust as a beneficiary of politics, you will have even more control over income.

For example, your trust may allow the trustee to use a product to make a loan or purchase assets from your property or for void living confidence, liquidity flows, taxes and expenses. You could keep your spouse with income for life and provide the income of the two of their properties. You could keep the money in confidence for many years and the brand the necessary trustee for trust the beneficiaries who may include their children and grandchildren distributions. Sales in confidence remain behind, can protect the courts, creditors (including spouses) and irresponsible expenses.

Conversely, if your spouse or children are beneficiaries of the policy, you will not have control over how the money is spent. If your spouse is a recipient and you die first, the income is taxed in the state of your spouse; This could create a tax problem. In addition, your spouse (not you) will decide who will inherit all remaining money after he or she dies.

11. Are there other advantages to mention the trust as beneficiaries of an insurance policy?

Yes. If you name an individual as a recipient of a policy and this person is put out of action when he dies, the court will probably take control of the money. Most insurance companies do not knowingly pay an incompetent person, and insist, generally on judicial supervision. But if your trust is the beneficiary of the policy, the trustee can use the product without bidding for justice for your loved one.

12. Who can be a beneficiary of trust?

You may want to appoint any person or organization. Most people, their spouses, children and / or grandchildren to appoint.

13. Where does the trust money come from?

You, but in a special way. If you transfer money directly to the trustee, it could be a gift tax. But you can get tax-free annual gifts from makeup to $ 13,000 ($ 26,000 if your spouse joins you) to each recipient of trust. (Amounts can increase at regular intervals for inflation). If you give more than this, surplus applies to the federal gift tax exemption / goods.

Instead of making a gift directly to a recipient, there is the trustee for the benefit of each beneficiary. The Trustee shall notify each recipient who has received a gift on their behalf and, unless the recipient now chooses to receive the gift, the trustee shall invest the funds - to pay the premium on the insurance. Each recipient must understand the consequences of the present take now; For example, you can reduce the trustee's ability to pay premiums.

14. Are there any restrictions on the transfer of my existing policies to a trust insurance policy?

Yes. If you die within three years after the date of transfer it will be considered by the IRS and the insurance is considered invalid in your taxable estate. It can also be a gift tax. Be sure to discuss these with your consultant.

15. Can I make any changes in confidence?

An insurance trust is irrevocable, which usually means that you can not make any changes to it. However, under the uniform confidence code (UTC) and regulations in some states settling, you can make some changes. However, you should read the document carefully before signing trust.

16. When should I place a trusted insurance?

You can hire one at any time, but because trust is irrevocable, many people wait until they are between 50 and 60 years. Until then, family relationships have generally been solved. Do not expect too much; They can not be insurable. And remember, if you have the confidence to transfer the existing policies, three years after the transfer will live their validity.

17. Should I seek professional help?

Yes. If you believe an irrevocable insurance trust worth for you and your family would be to talk to an insurance professional, lawyer inheritance planning, corporate trustee or CPA who has experience with these.

18. The Benefits of a Life Insurance Trust

• It provides instant cash to pay land taxes and other expenses after death.
• Reduces land taxes to unlock their heritage.
• Cheap way of inheritance tax.
• The sales avoid will and are free of income tax and wealth.
• It gives you the maximum control over the insurance policy and how revenue is used.
• It can provide without the insurance product income to your spouse, in the estate of the spouse.
• It prevents the court from controlling the insurance product when the recipient is put out of action.

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