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  • Recent Articles

  • Life Insurance To Pay Estate Tax


    Death is the event that triggers the estate tax. Death is also the event that triggers a life insurance company to pay off. There is no financial product that is a better match for estate tax planning. Life insurance is the only asset you will ever own that will reach its highest value at the precise moment of greatest need. Life insurance can help make up for a lot of bad planning or a lack of planning altogether.

    The Real Magic Comes When You Combine The Appropriate Estate Tax Strategies With Life Insurance. And Here Is The Reason Why…

    Neither one is as effective on its own. Most estate planning strategies involve moving assets out of the estate over a period of years without causing a gift tax. Many strategies do not work well if you die within a prescribed period of time or do not live a long time. This mortality risk can nullify the benefits of certain techniques such as Qualified Personal Residence Trust – QPRT and Grantor Retained Annuity Trust – GRAT. Life insurance, on the other hand, is more effective in the early years than the later years. Combining life insurance with the appropriate estate planning strategy can guarantee a successful planning transaction. They perfectly complement each other.

    Although the time of your death may not be anticipated, estate and settlement costs can be.  These liabilities can be easily offset by an appropriate amount of life insurance. Those with large real estate holdings and other illiquid assets may be in real trouble. Many will not have the money to pay the estate tax which may cause a forced liquidation; at fire sale prices. Learn to love life insurance. First do everything you can to reduce the estate tax bite, and then if you can qualify for life insurance, acquire every bit of the amount you need to liquidate the remaining estate tax liability. There are huge tax incentives to do it. If you want to keep things simple or guarantee success, add life insurance.

    Let Us Make Life Insurance Easy For You To Understand

    With the right type of policy you pay a guaranteed premium for a guaranteed death benefit. The guaranteed death benefit can be received income tax free, and estate tax free, at an uncertain time in the future, when properly structured.  The insurance proceeds are then used to replace the value of assets lost to the estate tax, or, to pay the estate tax related to those assets in your estate that are not liquid.

    Our Experience Is That People Have No Objection To Life Insurance, They Object To Having To Pay The Premiums.

    They view life insurance premiums as an expense.  Life insurance premiums are not an expense. How can the premiums be an expense when your family ends up with more money, not less money?  Would you say that buying a CD, Municipal Bond, Stock or Mutual Fund an expense?  Of course not! It is merely a repositioning of assets.  It is taking money out of one pocket where it will be highly taxed and putting it into another pocket, where it can mushroom at death, with no tax when properly structured.

    Did you know that hedge funds, banks, and other institutional investors are buying existing life insurance policies from people like you and paying substantial sums of money?  These institutions then continue the premium payments and ultimately collect the death benefit. Their financial models think life insurance is a good investment. They understand that life insurance at advanced ages may be under-priced. If it is a good deal for them, it is an even better deal for you and your family.

    Something as simple as an appropriate amount of life insurance can easily solve many estate tax problems. You have a choice…You can write one check to the IRS for $10,000,000, $20,000,000, or more; or you can write a series of much smaller checks to a life insurance company for an equivalent amount of life insurance.

    This is not difficult. You decide.

    Large Insurance Premium Payment Strategies

    Many of you already have or need large amounts of life insurance. The premiums on these policies, depending on your age, can easily exceed your available annual gift tax exclusions and require you to either use up your gift tax unified credit exemption or pay gift tax. We have solutions to solve these problems.

    Wherever you are located, email us at info@ebsresponsiblewealth.com to arrange for a free
    consultation. Our common sense approach to estate planning and life insurance to pay estate tax will help you get to where you want to be.





    Internal Revenue Service Circular 230 Disclosure
    Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any tax advice set forth herein with respect to U.S. federal tax issues was not intended or written by E. Brian Singer, Shaun Singer, EBS Group, EBS Responsible Wealth, or EBS Business & Investment Group, Inc., to be used, and cannot be used, by you or any taxpayer, for the purpose of avoiding any penalties that may be imposed on you or any other person under the Internal Revenue Code.

    Our role is to help you evaluate planning techniques that can reduce your future estate tax and gift tax, and increase the wealth transferred to your family. Brian Singer is not an attorney. Although he is a CPA (Inactive-California), it is not his intention to become your CPA. He no longer engages in the practice of public accounting. This and any other analysis or discussion is not meant to address all the issues and risks as you might find in a technical legal analysis. That task, if necessary, and if you are willing to pay the fee, is the responsibility of your attorney. Brian Singer attempts to take complicated tax principles and reduce them to understandable techniques for the layperson, in plain English. Any discussion and/or written analysis are meant to give you an overview of the anticipated benefits to be derived by employing specific techniques.  Final responsibility for the tax aspects rests with the attorney of your choosing. All techniques require careful drafting by a highly competent tax attorney with specialized knowledge.  A concept that might work when competently drafted, could fail as a result of mistakes made in the documents prepared by an attorney not proficient in these areas. The appreciation rates, investment earning rates, tax rates, valuation discounts, and other factors are hypothetical assumptions.  The benefits from implementing any technique will ultimately be better or worse than described depending upon variation from the assumptions. There are no guaranteed results; either in an economic analysis or in application of the tax law. We hope you will decide to use our services. Any planning we propose is incidental to the purchase of insurance. Since insurance is used to pay estate tax, the less tax you will owe, the less insurance required. The planning is essential in the determination of your insurance needs. You are in no way obligated to purchase any insurance. If it makes sense for you, then buy it; if it doesn’t make sense for you, then don’t buy it. You are not expected to do anything that you feel is not in your best interest. We may choose to disengage at any time.

    Copyright 2011 © EBS Responsible Wealth