Raleigh Irrevocable Life Insurance Trust Attorney

Not many people know that the death benefits from their life insurance policy are subject to estate taxes. There is a way around this through what are called Irrevocable Life Insurance Trusts (ILIT).

Irrevocable Life Insurance Trusts

If you have a significant life insurance policy (generally $2 million or more) and would like to save on estate taxes, the Armor Trust Attorneys can help you. Highly-experienced attorney Erica Ferranti helps clients with their comprehensive estate planning and asset protection needs including preparing ILITs and other types of trusts.

Learn more about how an ILIT can be beneficial to your family and contact our Raleigh Office. Call (919) 571-4398. We serve clients in Raleigh, Durham, Chapel Hill and the surrounding Triangle counties.

How ILITs Work

Traditionally, ILITs are used to save on estate taxes. An ILIT takes life insurance proceeds out of an estate and places them in a trust. Essentially, the trust takes ownership of the life insurance policy outside of the estate.

ILITs also can allow for a gift tax exclusion of up to $13,000 per year. However, in order to avoid paying a gift tax, the gift has to be a "present interest gift." The way to make a life insurance premium payment a present interest gift is to use a "Crummey Letter."

Here is a hypothetical example to help demonstrate the advantage of ILITs:

Joe, a father of two children, has a $2 million life insurance policy, which he has cleverly placed in an ILIT. Suppose the annual premiums are $26,000 per year. In order to avoid paying a gift tax on the $26,000 he pays into the trust, he uses a Crummey Letter. The trustee of the ILIT sends a Crummey Letter to Joe's two children stating $26,000 has gone into the trust; they have a right to withdraw from the trust, but can waive this right. The children smartly sign the letter waiving this right and the policy continues.

At Joe's death, his two children will receive a death benefit from the policy at an estimated $2 million and Joe's estate does not have to pay estate taxes on the $2 million. (Every circumstance is different and Armor Trust Attorneys can consult with you on how an ILIT can help with yours.)

Contact Our North Carolina Gift Tax Exemption Lawyer

For more information about protection of your life insurance policy, please schedule a consultation by contacting our Raleigh office at (919) 571-4398. Our Raleigh irrevocable life insurance trusts lawyer will take the time to explain how an ILIT will work in your individual circumstance.