Irrevocable Life Insurance Trusts Attorneys and Lawyers in Jacksonville, Florida

Will assist with the design, preparation and implementation of an ILIT to meet your needs

Irrevocable Life Insurance Trusts Jacksonville Attorneys and Lawyers in Florida

If you need the assistance of a Jacksonville estate planning, or Florida wills and trusts lawyer to learn more about irrevocable life insurance trusts, or to establish or administer an irrevocable life insurance trust, please contact our Jacksonville trusts attorneys for irrevocable life insurance trusts at (904) 448-1969, toll free at 1-866-510-9099, or email us at Info@TheColemanLawFirm.com

1. What does an irrevocable life insurance trust do?

An irrevocable life insurance trust (“ILIT”) lets you reduce or even eliminate estate taxes (also known as the “death tax”), so more of your estate can go to your loved ones. It also gives you more control over your life insurance policies death benefits proceeds and the money that is paid from them. The ILIT also provides a mechanism for an individual to create substantial wealth for generations of descendants, especially with the $5.45 million exemption from estate and gift tax that can be used by each individual to fund such a trust.  Our Jacksonville irrevocable life insurance trust attorneys and lawyers can assist you in the design, preparation, implementation and administration of an ILIT.

2. What are estate taxes?

Estate taxes are different from, and in addition to, probate expenses and final income taxes which are due on the income you receive in the year you die.

Federal estate taxes are expensive (historically 35-55%) and they must be paid in cash, usually within nine months after the date of your death. Since few estates have this kind of cash, estate assets often have to be liquidated. But if you plan ahead, estate taxes can be substantially reduced or even eliminated.

If you would like to learn whether you and your family are subject to the Federal estate tax, call our Jacksonville trust lawyers to schedule a consultation at (904) 448-1969, or toll free at 1-866-510-9099, or email us at Info@TheColemanLawFirm.com.

3. Who has to pay estate taxes?

Your estate will have to pay federal estate taxes (the “death tax”) if its net value at your death is more than the “exempt” amount set by Congress at that time. For the year 2016 the exemption amount is $5.45 million for each individual.  The estate tax rate is 40% of the amount of your assets that exceed the exemption amount. Some states have their own death or inheritance tax, so your estate could be exempt from federal estate tax and still have to pay a state estate tax.

Year of Death………”Exempt” Amount
2016…………………….$5.45 million, which is adjusted annually for the increase in the consumer price index.

Our Jacksonville estate planning attorneys can assist you with estate tax planning to avoid, or at least minimize, your potential estate tax exposure.  If you would like to schedule a consultation to determine how you can legally avoid the Federal estate taxes, or how you can use an irrevocable life insurance trust to provide cash to pay your estate taxes upon death, please call our office to schedule an appointment a (904) 448-1969, or toll free at 866-510-9099, or email us at Info@TheColemanLawFirm.com.

4. What makes up my net estate?

To determine your current net estate, add the fair market value of all of the assets that you own or control, then subtract your debts. Life insurance policies in which you have any “incidents of ownership” are included in your taxable estate for estate tax purposes, even if the proceeds go directly to the beneficiary. This includes life insurance policies you can borrow against, assign or cancel, or for which you can revoke an assignment, or can name or change the life insurance beneficiary. You can see how life insurance death benefit proceeds can increase the size of your taxable estate and the amount of estate taxes that must be paid.  Our Jacksonville irrevocable life insurance trust attorneys can help you protect your life insurance death benefit from the Federal estate tax.

5. How does an irrevocable life insurance trust reduce estate taxes?

The irrevocable life insurance trust (ILIT) owns your life insurance policies for you, and is the life insurance beneficiary for the death benefit proceeds. Since you don’t personally own the life insurance policy or have any “incidents of ownership,” the life insurance death benefit proceeds will not be included in your estate — so your estate taxes are reduced. (There is a three-year rule for existing life insurance policies, which is explained later.)

Let’s say you are married, with a combined net estate of $16 million, $1 million of which is life insurance, and both you and your spouse die when the estate tax exemption is $5.45 million. An estate tax planning provision in a revocable living trust or a last will and testament would protect up to $10.9 million from federal estate taxes. But your estates would have to pay $2,000,000 in federal estate taxes (based on 2016 rates) and approximately $400,000 of that would related directly to the life insurance policy. With an irrevocable life insurance trust (ILIT), the $1,000,000 of life insurance death benefit proceeds would not be includible in your estate for federal estate tax purposes. That would save your family approximately $400,000 in federal estate taxes.

If you would like to explore how our irrevocable life insurance trusts attorneys can help you protect your family from the Federal estate tax, and otherwise help you protect your family, please call us at (904) 448-1969, or toll free at 866-510-9099, or email us at Info@TheColemanLawFirm.com.

6. What if my estate is larger than this?

If your estate will remain obligated to pay federal estate taxes after you transfer your life insurance policy to an irrevocable life insurance trust, you can further reduce your federal estate tax costs — by having the irrevocable life insurance trust buy additional life insurance death benefits. Here are three very good reasons to do this:

  1. If the life insurance trust buys the life insurance policy, and is the life insurance beneficiary, the death benefit proceeds will not be included in your taxable estate after your death. So the life insurance death benefit proceeds, which are not subject to probate or income taxes, will also be free from federal estate taxes.
  2. Life insurance proceeds are available right after your death. So your estate assets will not have to be liquidated to pay federal estate taxes.
  3. Life insurance can be an inexpensive way to pay federal estate taxes and other probate expenses. So you can leave more estate assets to your loved ones.

If you would like to learn how life insurance can help you and your family preserve your wealth, please call our Jacksonville irrevocable life insurance trusts attorneys to schedule an appointment at (904) 448-1969, or toll free at 866-510-9099, or email us at Info@TheColemanLawFirm.com.

7. How does an irrevocable life insurance trust work?

An irrevocable life insurance trust (ILIT) has three parties involved. The “grantor” is the person creating the trust — that’s you. The ILIT “trustee” you select manages the life insurance trust. And the life insurance trust “beneficiaries” you name in the insurance trust will receive the trust assets after your death.

The trust trustee purchases a life insurance policy, with you as the insured, and the irrevocable life insurance trust as owner and (usually) beneficiary. When the life insurance death benefit is paid after your death, the trustee of the ILIT will collect the life insurance death benefit funds, make them available to pay federal estate taxes and/or other expenses (including debts, legal fees, probate costs, and income taxes that may be due on IRAs and other retirement benefits), and then distribute the remaining death benefit proceeds to the life insurance trust beneficiaries as you have instructed in the irrevocable life insurance trust document.

8. Can I be my own trustee of my irrevocable life insurance trust?

Not if you want the estate tax advantages we’ve discussed above. Some people name their spouse and/or adult children as trustee(s) of the irrevocable life insurance trust, but often they don’t have enough time or experience. Many people choose a corporate trustee (bank or trust company) because they are experienced with administering irrevocable life insurance trusts. A corporate trustee will make sure the irrevocable life insurance trust is properly administered and the life insurance premiums promptly paid to the life insurance company.  Our Jacksonville irrevocable life insurance trust attorneys can help you determine who would be the most appropriate trustee for you and your family.

9. Why not just name someone else as owner of my life insurance policy?

If someone else, like your spouse or adult child, owns a life insurance policy on your life and dies first, the cash/termination value of the life insurance policy will be included in his/her taxable estate and potentially be subjected to estate taxes. That scenario creates the possibility of no tax savings.

But, more importantly, if someone else owns the life insurance policy, you lose control. This person could change the life insurance beneficiary, take the cash value of the life insurance policy, or even cancel the life insurance policy, leaving you with no life insurance death benefit proceeds. You may trust this person now, but you could have problems later on because of the individual’s changed circumstances. The life insurance policy could even be garnished by creditors to help satisfy the other person’s debts to creditors, even in Florida. The complete loss of the life insurance policy’s death benefits is a possible result.  An irrevocable life insurance trust is safer; it lets you reduce federal estate taxes and keep control of the life insurance death benefits.

10. How does an irrevocable life insurance trust give me control?

With an irrevocable life insurance trust, your life insurance trust owns the life insurance policy. The trustee you select must follow the instructions you put in your irrevocable life insurance trust document. And with your irrevocable life insurance trust as beneficiary of the life insurance policies, you will even have more control over the life insurance death benefit proceeds.

For example, your irrevocable life insurance trust agreement could allow the trustee to use the life insurance death benefit proceeds to make a loan to or purchase assets from your estate or revocable living trust, providing cash to pay estate taxes and expenses. You could provide your spouse with lifetime income and keep the life insurance proceeds out of both of your taxable estates. You could keep the life insurance proceeds money in the irrevocable life insurance trust in a testamentary trust for years and have the trustee make distributions as needed to trust beneficiaries, which can include your children and grandchildren. Life insurance proceeds that stay in the irrevocable life insurance trust can be protected from courts, creditors (even divorcing spouses) and irresponsible spending.

By contrast, if your spouse or children are life insurance beneficiaries of the life insurance policy, you will have no control over how the life insurance death benefit money is spent. If your spouse is the life insurance beneficiary and you die first, all of the life insurance proceeds will be in your spouse’s taxable estate; that could create a death tax problem. Also, your spouse (not you) will decide who will inherit any remaining life insurance money after he or she dies.

11. Are there other benefits to naming the irrevocable life insurance trust as beneficiary of a life insurance policy?

Yes. If you name an individual as life insurance beneficiary of a life insurance policy and that person is incapacitated when you die, the probate court will probably take control of the life insurance death benefit money through a guardianship of the person or the property, or both. Most life insurance insurance companies will not knowingly pay life insurance death benefits to an incompetent person, and will usually insist on probate court supervision through the guardianship. But if your irrevocable life insurance trust (ILIT) is the life insurance beneficiary of the life insurance policy, the trustee can use the death benefit proceeds to provide for your loved one without probate court interference.

12. Who can be beneficiaries of the irrevocable life insurance trust trust?

You can name any person or organization you wish as the beneficiary of your life insurance trust. Most people name their spouse, children and/or grandchildren as trust beneficiaries.

13. Where does the trustee of the irrevocable life insurance trust get the money to purchase a new life insurance policy?

From you, but in a special way. If you transfer money directly to the trustee of the irrevocable life insurance policy, there could be a gift tax. But you can make annual tax-free gifts of up to $15,000 ($30,000 if your spouse joins you) to each trust beneficiary of your irrevocable life insurance trust. (Amounts may increase periodically for inflation.) If you give more than this, the excess is applied against your federal gift/estate tax lifetime exemption.

Instead of making a gift directly to a life insurance trust beneficiary, you give it to the trustee of the irrevocable life insurance trust, for the benefit of each beneficiary. The trustee notifies each trust beneficiary that a gift has been received on his/her behalf and, unless the trust beneficiary elects to receive the gift now, the trustee will invest the funds — by paying the premium on the life insurance policy owned by the ILIT. Each trust beneficiary must understand the consequences of taking the gift now; for example, it may reduce the trustee’s ability to pay life insurance premiums for the life insurance policy owned by the irrevocable life insurance trust.

14. Are there any restrictions on transferring my existing life insurance policies to an irrevocable life insurance trust?

Yes. If you die within three years of the date of the transfer of an existing life insurance policy to the irrevocable life insurance trust, the life insurance policy death benefit proceeds from the life insurance will be included in your taxable estate. There may also be a gift tax. If you have questions about whether life insurance will be included in your taxable estate, please call your Jacksonville lawyer for estate tax planning for a no-cost, no-obligation consultation to discuss this matter at 904-448-1969, toll free at 866-510-9099, or email your Jacksonville, Florida estate planning or trust attorney at Info@TheColemanLawFirm.com.

15. Can I make any changes to the irrevocable life insurance trust?

An insurance trust is irrevocable, which generally means you cannot make changes to it. However, under the Uniform Trust Code (UTC) and decanting provisions in some states, including Florida, you may be able to make some changes to your irrevocable life insurance trust. Still, you should read the irrevocable life insurance trust document carefully before you sign it because making changes is not automatic or simple.

16. When should I set up an irrevocable life insurance trust?

You can set up one at any time, but because the life insurance trust is irrevocable many people wait until they are in their 50s or 60s. By then, family relationships have usually settled. Just don’t wait too long; you could become uninsurable. And remember, if you transfer existing life insurance policies to the irrevocable life insurance trust, you must live three years after the transfer for the life insurance proceeds to be excluded from your taxable estate.

17. Should I seek professional assistance to establish an irrevocable life insurance trust?

Yes. If you think an irrevocable life insurance trust would be of value to you and your family, talk with an life insurance professional, Florida estate planning or trust attorney, corporate trustee, or CPA who has experience with irrevocable life insurance trusts.  If we can be of assistance to you with the establishment of an irrevocable life insurance trust, please call our Jacksonville lawyers for estate tax planning at 904-448-1969, toll free at 1-866-510-9099, or email us at Info@TheColemanLawFirm.com

18. Benefits of an Irrevocable Life Insurance Trust
  • Provides immediate cash to pay federal estate taxes and other expenses after death.
  • Reduces federal estate taxes by removing life insurance death benefit proceeds from your taxable estate.
  • Inexpensive way to pay federal or Florida estate taxes.
  • Life insurance death benefit proceeds avoid probate and are free from income and federal estate taxes.
  • Gives you maximum control over life insurance policy death benefit proceeds and how the life insurance proceeds are used.
  • Can provide income to spouse without life insurance proceeds being included in spouse’s taxable estate.
  • Prevents the Florida probate court from controlling life insurance death benefit proceeds if the trust beneficiary is incapacitated.

The Jacksonville, Florida estate planning, wills and trusts attorneys and lawyers at the Coleman Law Firm are experienced in the design, drafting and implementation of irrevocable life insurance trusts (ILITs).  If you would like to learn more about how an irrevocable life insurance trust may help you reduce or eliminate estate taxes, or control death benefit proceeds for the protection of your loved ones, please contact your Jacksonville lawyer for irrevocable life insurance trusts at (904) 448-1969 [Toll free at 866-510-9099] or email us at Info@The Coleman Law Firm.com, to schedule a consultation.

The Jacksonville Florida probate, estate planning lawyers and elder law attorneys, asset protection attorneys, guardianship lawyers, Medicaid planning attorneys, and small business lawyers with the Coleman Law Firm offer their services as estate planning, probate, elder law, Medicaid planning, asset protection, small business, and guardianship lawyers and attorneys primarily in Northeast Florida including the following counties, towns, and cities:  Duval County – Jacksonville, Jacksonville Beach, Atlantic Beach, Neptune Beach; St. Johns County – St. Augustine, Ponte Vedra Beach, Nocatee, St. Augustine Beach; Clay County – Orange Park, Middleburg, Green Cove Springs; Nassau County – Amelia Island, Fernandina Beach, Yulee, Callahan; Flagler County – Flagler Beach, Palm Coast, Bunnell; Baker County – Macclenney, Glen St. Mary; Putnam County – Palatka, Interlachen; Columbia County – Lake City, Fort White; and in other parts of Florida as requested or necessary.  We are a participating attorney in the AARP Legal Services Network.

If you need a trust lawyer in Jacksonville, Florida, please call us at (904) 448-1969, or toll free at 866-510-9099, or email us at Info@TheColemanLawFirm.com

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