These days a lot of families need two incomes to make ends meet so it is important to consider where your family would be if one of those incomes were to suddenly disappear. A lot of people think that estate planning is only relevant to older Americans; but in some ways, it is more important for younger adults. More people may be directly relying on them for the money they bring in regularly. Life insurance is crucial for income replacement for most people. As a result, our Florence estate planning lawyer recommends using life insurance policies as part of your comprehensive estate plan.
Some benefits of including life insurance in estate planning
Life insurance serves other purposes in estate planning as well. For example, it can be used to balance inheritances. Let’s say that your daughter has worked in the family business all of her life and the business represents a significant percentage of your estate. You may want to leave your business to your daughter, but then you would not have sufficient other assets to give your son an inheritance.
One solution is to take out a life insurance policy equal to the value of the business and make your son the beneficiary, balancing the inheritances. To learn how to make life insurance part of a comprehensive estate plan, simply pick up the phone to arrange for a consultation with a good northern Kentucky estate planning lawyer.
Life insurance may play a significant role in your estate plan for any number of reasons, but it is important to understand that life insurance proceeds may be subject to the estate tax if they are conveyed directly to a beneficiary.
How an irrevocable life insurance trust can help
This potential taxation can be avoided through irrevocable life insurance trusts. If you arrange for the life insurance policies to be the property of the trust rather than your personal property. But you name trust beneficiaries, and if you are married, your beneficiary would presumably be your spouse.
When you pass away the insurance policy proceeds would be owned by the trust rather than your surviving spouse so they would not be taxed your estate or your spouse’s estate, but your spouse could still benefit from the trust. And once your spouse passes away, the remaining assets will go to your secondary beneficiaries (your children) without estate tax. This is why our Florence estate planning lawyer sometimes recommends this type of trust.
Irrevocable life insurance trusts
A well-constructed ILIT can indeed preserve wealth. If you’re interested in including an ILIT in your overall estate plan, don’t hesitate to take action and make an appointment to speak with our licensed and experienced Florence estate planning lawyer.
Benefits of an Irrevocable Trust
An irrevocable trust can have other benefits as well – and some of them mirror those of the revocable trust variety. For example, an irrevocable trust keeps trust assets out of probate and preserves privacy. It also provides a reliable mechanism for transferring assets when you die. It does not, however, provide you with the ability to control those assets. Once you relinquish ownership, you give up control and cannot reclaim them by dissolving the trust.
Since the assets are beyond your reach and no longer part of your estate, creditors cannot gain access to them in lawsuits. If you need to apply for Medicaid benefits for nursing home care in the future, the assets in a well-drafted irrevocable trust won’t be counted when your eligibility is calculated. If you have questions about any of these issues ask our Florence estate planning lawyer.
If you have questions regarding irrevocable life insurance trusts or other estate planning matters, please contact the experienced attorneys at The Potter Law Firm for a consultation. You can contact us either online or by calling us at (606) 324-5516 (Ashland, KY) or (859) 372-6655 (Florence, KY), or for individuals in the Charlotte, NC area at (704) 944-3245.