Ilit Agreement

For example, Donna has a property valued at approximately $15 million, consisting primarily of a US$3 million principal residence in Florida, a $5 million investment real estate portfolio, a $2 million public relations company, $3 million in unskilled investments and $2 million in an IRA (skilled fund). Donna fears that after her death, her children will be forced to liquidate some of their investments or, worse, sell the public relations company in a fire sale to cover the IRS` estimated $1.5 million in tax debt. Currently, the cornerstone of Donna`s estate plan is a revocable trust that invents equally the entirety of her estate to her three daughters. In the past, ILIT`s primary objective was to avoid death taxes. But it`s a versatile trust and can serve many purposes like divorce planning, buy/sell agreements, mixed family planning and much more. Easy to sculpt and easily recognized by the IRS, and ILIT is part of many succession plans. Although insurance income collected by a beneficiary after the death of the insured is generally not subject to federal income tax, income to be paid to the estate or the heir of the scammer is included in the value of the fraudster`s total wealth at the time of death (known as “gross reduction”) and may in turn be subject to federal and national tax. One way to do that is to use an irrevocable life insurance fund. If a trust (unlike you) has your policy and the proceeds are not payable to your estate, it is not considered part of your estate, which allows for a tax exemption on the value of the insurance policy. An ILIT is an irrevocable trust, primarily designed to hold life insurance for the client whose estate is likely to owe inheritance tax. As the insurance policy is held by ILIT and not by the customer, the value of the policy and the total value of the proceeds of death are not taken into account in the IRS`s calculation of the client`s estate.