Personal Life Insurance Trusts (Portfolio 807)

Description

The Bloomberg Tax Portfolio, Personal Life Insurance Trusts, No. 807, describes the income, estate, and gift tax consequences of establishing a revocable or irrevocable life insurance trust. This Portfolio analyzes the practical and tax advantages to be gained from the use of life insurance trusts, as well as the principal planning and drafting problems associated with their establishment.

As an estate planning tool, life insurance has no peer. It can create an estate where none otherwise exists or it can provide liquid funds to safeguard existing wealth. The benefits of life insurance as an estate planning tool can be increased through careful planning for the purchase and disposition of the life insurance itself. The personal life insurance trust is the premiere vehicle for achieving maximum flexibility in utilizing the death proceeds of life insurance to accomplish the decedent’s personal and tax goals.

This Portfolio discusses the significant advantages that can be achieved through the correct structuring of irrevocable insurance trusts. This Portfolio also addresses other technical problems relating to the disposition in trust of life insurance, including obtaining the annual gift tax exclusion, policy transfer methods (including transfers within three years of the decedent’s death), generation-skipping transfer tax allocation issues, and drafting problems and techniques. For a detailed discussion of the federal estate and gift tax treatment of life insurance generally, see 826 T.M., Life Insurance.

This Portfolio may be cited as Slade, 807 T.M., Personal Life Insurance Trusts.

Table of Contents

I. General Overview
II. Gift Tax Concerns in Creating and Maintaining a Life Insurance Trust
III. Estate Tax Concerns in Structuring a Life Insurance Trust
IV. Generation Skipping Transfer Tax Concerns in Structuring a Life Insurance Trust
V. Income Taxation of Life Insurance Trusts
VI. Use of Irrevocable Insurance Trusts in Split-Dollar Arrangements
VII. State Law Considerations
VIII. Additional Considerations in the Preparation and Administration of a Life Insurance Trust