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Lifetime gifting is a simple but surprisingly effective way to reduce the value of an estate. Every person has a gift tax exemption of $5,000,000 which allows for the transfer of gifts up to this amount during life without incurring any gift tax. Even gifts made in excess of the $5,000,000 gift tax exemption may have beneficial tax results because the payment of the gift tax is preferable to the payment of the estate tax. (more…)
An Irrevocable Life Insurance Trust (ILIT) is an irrevocable trust established in order to own life insurance on the life of the settlor of the ILIT. Normally, the proceeds of the life insurance policies on an individual’s life are includable in that person’s gross estate when a person dies. If the ILIT owns the policy and the settlor holds no incidents of ownership, the proceeds of the life insurance policy are not includable in the settlor’s estate. The reason for this is because the ILIT is a separate entity from the settlor.
Internal Revenue Code Section 412(e)(3) Plans (formerly known as 412(i) Plans) can be an appropriate alternative retirement vehicle for certain wealthy small business owners. A 412(e)(3) Plan is a defined benefit plan which is funded with annuities or a combination of annuities and whole life insurance. The primary difference of 412(e)(3) plans and traditional defined benefit plans is that they are capable of creating larger tax-deductible contributions for the plan sponsor, the employer. (more…)