Estate Tax Strategy

With the Fiscal Cliff Bill signed into law at the beginning of 2013. The Federal Estate Tax Exemption is now set at $5,340,000 adjusted annually for inflation with a 40% tax rate on the amount over the exemption.  With these new changes it is very important to review your current Estate Plan and ensure that your beneficiaries receive the Financial Legacy you have worked so hard to accumulate.  The Estate Tax planning strategies that we provide are very powerful yet simple to implement, we utilize Life Insurance because it provides a Lump Sum of Tax Free Money precisely at the time it is needed.

Survivorship Standby Trust is a very unique and powerful Estate Tax Strategy.  It is a true wait and see plan because the owner controls the Cash Value and the Policy Death Benefit all the way up until death.  It uses a special type of Cash Value Life Insurance contract, commonly known as Survivorship Life Insurance or Second to Die Policy. As the name implies the Death Benefit pays out at time of the second insureds Death. This type of policy works extremely well in Estate Tax Planning for couples because there is no Estate Tax due until the surviving spouses death.  Generally when establishing a Survivorship Standby Trust the spouse with the shorter life expectancy purchases and funds a Survivorship Life Insurance Policy with a face amount large enough to cover the anticipated Estate Tax.  The Cash Value of this policy is available for the owner to use while they are alive.  An Irrevocable Life Insurance Trust is named as Contingent Owner and Primary Beneficiary of this Policy.  Upon the Death of the Owner, the Trust immediately becomes the new owner of the Survivorship Life Insurance Policy and its cash value, thus removing it from the Taxable Estate.  Upon the death of the surviving spouse the policy pays out the Death Benefit Income & Estate tax Free to the Trust.  The Trust now has the cash to pay any Estate Taxes that are due on the surviving spouses estate.

Estate Tax Insurance Trust is very versatile. It can be easily established for a couple by using a Survivorship Universal Life Insurance Contract and just as easily established for a single person by using a Permanent Life Insurance contract.  This strategy works by gradually transferring a small portion of cash assets each year out of your taxable estate and into a family trust, usually an amount equal to the annual gift tax exclusion ($14,000 per person in 2014).  The Family Trust can then use the cash to purchase a Life Insurance policy.  At time of death the Life Insurance policy pays out tax free to the Family Trust.  The Trust then has the money to pay any outstanding Estate Tax's due.


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