The amount to be transferred to the ILIT
will be $37,310.
That's the only way I can think of to make an ILIT
not a grantor trust.
Transferring an existing policy into an ILIT
can shield a death benefit from estate taxes and generation-skipping transfer taxes.
Tax advisers are challenged to find the best way to use gift tax exemptions, and a combination of a FLP, GRAT and an ILIT
can offer significant leverage.
, in a later year, purchases the policy from the PSP for the policy cash surrender value of $500,000.
Life insurance can be an effective funding vehicle inside the ILIT
Also enjoying heightened interest is the private split-dollar plan: a technique wherein an insured (or spouse) and (usually) an ILIT
"split" the costs (premiums) and benefits (cash value and death benefit) of owing a permanent life insurance policy.
If these activities seem too daunting, the UP1A allows ILIT
trustees to hire an "insurance advisor" (prudent delegatee) to assist with these duties.
Example 1: An ILIT
holding a whole life insurance policy receives a $10,000 premium each year, but the CSV at the beginning of year 10 is only $30,000.
Mary and Mark's lawyer drafts the ILIT
document and the trustee purchases a life insurance policy on each of their lives.
If the policy transferor were to continue to fund the premiums after the transfer, as is common when the policy is transferred to an ILIT
, the subsequent premiums paid by the transferor would be treated as gifts subject to tax, but could reduce the taxable estate.
Confusion arises, however, over the implications of backdating a policy prior to the effective date of the ILIT