This chapter discusses selected key gift tax issues concerning life insurance, including the gifting of an existing policy to an ILIT, and the payment of life insurance premiums.1 The starting point for gifts and life insurance is to determine the value of the policy that the insured wants to transfer either outright or in trust. […]
Author: radler
Section 2B: Income Tax Issues[Continued]
2B.6 RELATED OR SUBORDINATE PARTY DEFINITION In Rev. Rul. 95-58, 1995-2 C.B. 191, the IRS adopted the related or subordinate party definition of IRC section 672(c). The 1995 ruling (which revoked Rev.Ruls. 81-51, 1981-1 C.B. 458 and 79-353,1979- 2 C.B. 325, and modified Rev. Rul. 77-182, 1977-1 C.B. 273) holds that a grantor’s reservation of […]
Section 2A: Income Tax Issues
This chapter discusses selected key income tax issues concerning life insurance and ILITs.1 Recent changes in the Internal Revenue Code now permit an insured to receive life insurance proceeds income tax free under certain conditions, such as during a terminal or chronic illness. An ILIT drafted with sufficient flexibility can take advantage of these special […]
Section 1B: Benefits Of An Irrevocable Life Insurance Trust[Continued]
1B.7 INSULATE LIFE INSURANCE PROCEEDS FROM PROBATE AND SUCCESSIVE TAXATION AT MULTIPLE GENERATIONS With proper planning, life insurance proceeds can benefit successive generations without being subject to probate and without being included in the gross estates of the spouse and other beneficiaries. The use of an ILIT to hold the life insurance proceeds will avoid […]
Section 1A: Benefits Of An Irrevocable Life Insurance Trust
Life insurance is the only asset that Congress has bestowed with “most favored tax” status.1 No other investment provides the potential benefit that life insurance provides. Life insurance is unique2 and enjoys favorable tax status because of the important role it plays in protecting families. As a matter of policy, Congress has decided that life […]