IRC 2042 Reg. 20.2042-1
- Does the client need an ILIT?
- Who owns the policy?
- Who can be the trustee?
- What powers can the trustee(s) have?
- Who can be a beneficiary?
- Tax issues
- GST Tax
When Client Needs ILIT
Is the estate tax an important consideration for the client? If no, then an ILIT does not make sense.
ILIT Must be Irrevocable
ILIT Must Own Policy
Insured Should Not Be a Trustee
Insured Must Not Be Beneficiary
How ILIT Can Avoid Estate Tax
There is not income tax on the death benefit of a life insurance policy. But there might be an estate tax. So, for taxpayers who may be subject to an estate tax, estate planning for life insurance is necessary.
How do you keep the insurance policy out of the insured’s gross
Must Avoid Certain Grantor Trust Powers
ILIT and GST Tax Issues