Select the technique “Gift Existing Life Insurance” to illustrate the effect of moving your client’s life insurance policies into an Irrevocable Life Insurance Trust. An irrevocable life insurance trust (or ILIT) is a trust which owns life insurance, typically on the grantor and/or grantor’s spouse, and will be utilized for the trust beneficiaries (e.g., children). The grantor does not retain any rights to change, revoke or terminate. The trust principal should not be included in the grantor’s estate for estate tax purposes. For this technique, no data entry is required. The technique moves only those life insurance plans that you’ve indicated are available to be placed in a trust (on the Asset screen).
When a life insurance policy is owned by someone other than the insured (irrevocable trust or spouse) the program assumes that the policy owner is always the beneficiary. If the spouse is the owner and dies before the insured, the program assumes the policy is left to the insured spouse. If the spouse wants to gift the policy, the program assumes the policy is first gifted to the insured, and then from the insured to an irrevocable life insurance trust created by the insured.
All gifts of life insurance are assumed to be made by the insured owner. The program assumes the insured survives the three-year period under IRC Section 2035.
The program also assumes that any gifts of life insurance would be to an irrevocable life insurance trust created by the insured.
All gifts and future premiums are assumed to be covered by the gift tax annual exclusion. If this is not the case, we suggest that the policy cash value may be entered as a liquid asset owned by the policy owner. You may then request the outright gift technique to give away the liquid asset.
