Do you own a life insurance policy? If so, the proceeds from the policy will be included in your taxable estate when you die.
Strategy: Set up an irrevocable life insurance trust (ILIT). Then transfer ownership of the policy to the ILIT. Accordingly, the life insurance proceeds are removed from your estate, often saving your family tens or even hundreds of thousands of estate tax dollars.
Typically, this technique is used for an existing life insurance policy, but it also works if you arrange to have the trust purchase a new policy on your life (or the lives of you and your spouse).
The ILIT has been around for years, but it’s enjoying a revival of late, due to certain provisions in the new American Taxpayer Relief Act of 2012 (ATRA).
Here’s the whole story: Life insurance proceeds paid out from a policy where you are the insured are exempt from estate tax only if you don’t possess any “incidents of ownership” in the policy....(register to read more)