Media Type: Alert
As many are aware, in 2018 the federal estate tax exemption is currently $11.18 million, the Maryland estate tax exemption is $4 million (increasing to $5 million in 2019) and the D.C. estate tax exemption is $5.6 million while no estate tax is currently imposed in Virginia. Depending upon the circumstances, the applicable state exemption amount can often be reached quickly by life insurance death benefits that, while typically income-tax-free, are includable in your estate if you own the policy or have rights to it.
A properly drafted Irrevocable Life Insurance Trust (“ILIT”) provides a number of useful estate planning benefits. Perhaps the most common reason to use an ILIT is to remove the life insurance proceeds from both the grantor’s and the spouse’s taxable estate while allowing the proceeds to be available to meet the needs of the surviving spouse and descendants. However, it is important to ensure that the grantor does not retain any “incidents of ownership” over the policies that would cause the insurance proceeds to be included in the grantor’s estate. Accordingly, the ILIT is intended to be the owner and the beneficiary of the life insurance policy.
There are additional reasons why an ILIT may be useful:
A properly drafted ILIT can accomplish many estate planning objectives. However, because of strict IRS guidelines, it is crucial that certain drafting and procedural requirements be followed to ensure that the beneficiaries realize the full benefits offered by the ILIT.
If you have any questions about this or other estate planning issues, please call 301-340-2020.
The purpose of a donor agreement is to clearly establish that donor is not the child's legal parent.
Letters of Administration? "Interested Persons"? Accounts? Learn about the Maryland Probate Process.
Missteps, such as misclassification of employees and paying workers "salary," can lead to claims.
Get tips for paying accident-related medical bills in Virginia, Maryland and D.C.
The laws are complex and provide for significant penalties for any violations.