Life insurance is a great planning tool, but unless you’re careful it can also create an estate tax.
It’s a surprise to nearly everyone, but the payout of a life insurance policy is often included in calculating the assets of your estate. That could put your estate (and your children’s inheritance) in a tax situation, especially in Massachusetts.
A life insurance trust easily solves the tax problem
A life insurance trust, like the ones we prepare for our clients, avoids the problem. That’s because the government treats a life insurance policy held within a properly designed irrevocable life insurance trust as no longer part of one’s ultimate “taxable” estate.
A life insurance trust also solves the other problem
Not many parents would like their 18, 19 or 21year old son or daughter to receive several hundred thousand dollars or a million dollars or more before the child is old enough to handle sizeable money responsibly.
An irrevocable life insurance trust also provides an excellent structure detailing how the money will be used and when it will be paid to your heirs. In essence, it is a perfect way of creating a special trust for your children.
The irrevocable life insurance trusts that we design will not only help avoid a possible tax, but we’ll design a plan that will work for your children for years to come.