Can you move some of your assets into indexed universal life. I believe insurance is the best way to leave money to heirs tax free IIRC. Also, you can draw from the cash value without repaying or paying taxes.
...at least until they go after the life insurance policies.
This ensures that virtually all farms and most small businesses will have to incorporate to avoid the tax. The big kicker will be when inflation starts causing even small real assets to reach the minimum.
The family farm doesn’t easily convert to life insurance.
How long do you think it will be before they put a tax on life insurance policies?
You can have a child, say, own the policy and make gifts to the child of an amount sufficient to pay the premiums, but there are obvious drawbacks to that tactic.
“...you can draw from the cash value without repaying or paying taxes...”
Not true. My father had to take a bit of money from his life insurance plan and paid a whopping big amount for taxes!
Can you move some of your assets into indexed universal life. I believe insurance is the best way to leave money to heirs tax free IIRC
You need to do a liitle more homework before you start posting.
Life insurance proceeds are INCOME TAX FREE to the BENEFICARY of the policy, but are included in the ESTATE TAX if the NAMED INSURED is also the OWNER of the policy.
There are three parties to the life insurance policy/contract > the OWNER of the policy, the NAMED INSURED, and the BENEFICIARY.
Ask your agent to explain the difference; if he cannot tell you explicitly the difference, he is not a professional agent. If he has the CLU designation, he should be able to explain the difference to you.
You will pay ESTATE TAX on life insurance proceeds when the total value of assets, including the life insurance proceeds paid by the life insurance company, exceeds the exclusion amount, currently 3.5 million, when the NAMED INSURED is also the OWNER of the policy. If you own it, farm, small business, life insurance policy, you pay ESTATE tax.
It is the BENEFICARY of the policy who does not pay income tax on the proceeds. The proceeds of the policy then become part of the assets of the beneficiaries estate and then could be subject to estate tax when combined with other assets owned by that beneficiary person.
This is a tricky area of the estate tax law that requires competent legal counsel to set up irrevocable trusts and a competent and professional life insurance agent who also knows what needs to be done and how to properly complete the application for the life insurance policy. This is serious business and not for incompetents, lawyer or agent.
The estate tax is due and payable NINE months after death of the estate holder and the IRS only takes CASH, not real estate potatoes, or stock in a small business. Yes, I know there is an installment plan, but then you are in bed with the IRS for the duration of the installment. Do you really want to be in bed with the IRS for years....
The properly designed estate plan that needs cash, farms and small businesses, can utilize a life insurance policy to provide the CASH needed to pay the estate tax. The competent legal counsel is needed to keep the life insurance proceeds from also being included in the property owned by the deceased that will be subject to the estate tax. Some lawyers have a personal bias against insurance being used, if so, seek a second opinion.
Keep in mind that attorneys normally do not do post problem consulting work, unless specifically asked to do so. They will make more money/legal fees off the estate tax problem than setting up a trust concurrent with the purchase of a life insurance policy than providing you with post problem solutions to the estate tax problem.
There is no way to avoid the estate tax if you are the owner of the assets that are in excess of the current exclusion amount.
You can EVADE the tax, but sooner or later the IRS will catch up with the EVADER... The EVADER is a rank amateur, the IRS is the professional and every day deals with the attempts of the rank amateur to evade this onerous tax that is part and parcel of the communist manifesto.
The use of life insurance proceeds in the properly drawn estate plan is neither AVOIDANCE OR EVASION, but simply a way to have the cash proceeds to pay the tax, without having to liquidate the farm or the small business or enter into an installment plan with the IRS.
Yes, you will have to pay a premium for the policy and it will not be tax deductible. If you want to keep the farm / small business in the family, you will have to deal with estate tax, IN CASH and that is what the life insurance policy will deliver to the trust for the purpose of paying the tax. Such is life, until the Congress will somehow permantely do away with this tax burden that really impacts the owners of farms and small business.
Deal with this problem while you are still in good health. After the heart attack, diabetes, stroke, etc., you may become uninsurable and then you will not have this option available to you.
Family Trusts have to be fully funded. Irrevocable Trusts. Time to see an attorney who does Wills and Trusts. Maybe trusts aren’t taxed? I haven’t seen a law office for awhile on trust issues.