Estates, Gifts & Trusts

Personal Life Insurance Trusts (807)

 

Portfolio Description

Tax Management Portfolio, Personal Life Insurance Trusts, No. 807, describes the income, estate, and gift tax consequences of establishing a revocable or irrevocable life insurance trust. This portfolio analyzes the practical and tax advantages to be gained from the use of life insurance trusts, as well as the principal planning and drafting problems associated with their establishment.

As an estate planning tool, life insurance has no peer. It can create an estate where none otherwise exists or it can provide liquid funds to safeguard existing wealth. The benefits of life insurance as an estate planning tool can be increased through careful planning for the purchase and disposition of the life insurance itself. The personal life insurance trust is the premiere vehicle for achieving maximum flexibility in utilizing the death proceeds of life insurance to accomplish the decedent's personal and tax goals.

This portfolio discusses the significant tax differences between revocable and irrevocable trusts and between funded and unfunded trusts. This portfolio also addresses other technical problems relating to the disposition in trust of life insurance, including trusts for minors, obtaining the annual gift tax exclusion, policy transfer methods (including transfers within three years of the decedent's death), and drafting problems and techniques.

For a detailed discussion of the federal estate and gift tax treatment of life insurance generally, see 826 T.M., Life Insurance.

This portfolio may be cited as Slade, 807 T.M., Personal Life Insurance Trusts.

Georgiana J. Slade, A.B., Duke University (1982); J.D., Harvard Law School (1985); partner, Milbank, Tweed, Hadley & McCloy (1995-); fellow, American College of Trust and Estate Counsel; chair, Committee on Legislation, Trusts & Estates Section, New York State Bar Association (1998-); co-chair, Estates & Trusts Committee, Tax Section, New York State Bar Association (1995); affiliate, American Academy of Hospital Attorneys; member, Duke University Estate Planning Council; member, New York State Bar Association (1986-); member, American Bar Association (1986-); member, New York State Bar.

The author has co-authored 836 T.M., Partial Interests -- GRATs, GRUTs, QPRTs (Section 2702).