submitted by Richard P. Wilson, Esquire
One of the uses of life insurance is to pay federal estate tax incurred by a decedent with an estate in excess of the exempt amount.
It seems likely that the exempt amount (the amount not taxable) will be reduced to $6,000,000 per person. Any estate that exceeds that $6,000,000 will be taxed at 40%.
One of the uses of life insurance is to purchase a policy which can offset the tax.
Previously you could establish an irrevocable life insurance trust that would pay your heirs enough in this regard.
Life insurance is generally taxable in a decedent’s estate.
However, if the policy is owned by an irrevocable trust, the insurance proceeds will not be part of the decedent’s estate.
Previously, you could set up a trust and pay the insurance premiums annually.
The new law being proposed is changing that and that method of payment will no longer be accepted.
You can still buy such a policy and you will have to prepay the future premiums now.
Since this would be substantial you may be able to finance these premiums in an acceptable manner.