Jul 24
How life insurance is valued for estate taxes
Depending on the size of your estate, your family could have to deal with a large death tax payment after you die. Up to 55% of your estate!
If you properly structure the policy, the insurance proceeds won’t increase your estate taxes. To accomplish this, the owner of the policy must be another individual or several people (child or children for example) or it can be set up in an Irrevocable Life Insurance Trust (ILIT). The policy cannot be owned by the insured or transferred by the owner within three years of his or her death. If this is the case, the total proceeds are included in the estate.
For a good summarization of the estate tax treatment of life insurance, read this article from Scripps Howard.
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