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Irrevocable life insurance trusts get remodel

If you have included an irrevocable life insurance trust as part of your estate planning efforts, you may no longer need it. New federal tax regulations could eliminate the need of such a trust, even for wealthy estate owners.

Under current law, if your estate is worth less than $5.25 million as a single person or $10.5 million as a couple, you can pass your holdings on without worries of federal taxation. Irrevocable life insurance trusts are generally used to pay estate taxes, but the federal government recently raised the limit for tax-free inheritances. If estate taxes are no longer relevant, you may be able to eliminate the revocable trust entirely.

If you already have the trust set up, why would you want to get rid of it? Estate administration experts say the extra expense of hiring a trustee to manage your life insurance policy could simply add cost and administrative hassle. If your estate is losing value, you might also benefit from unloading the trust, especially if the costs to administer it are rising. Of course, if you are relatively young, your net worth could still increase past the $5.25 million threshold. If you are still in the beginnings of building your net worth, you should consider holding on to the trust until a later date.

Such trusts are still a good idea for individuals and couples with higher net worth, also. Other experts say keeping the trust could be a wise decision for everyone. Considering the national debt situation, the government could decide to revoke its recent tax reductions, and a trust could again become necessary.

As you can see, trust administration is different for nearly every situation. If your estate and assets are valued at or near $5.25 million, consider seeking assistance from a qualified estate planner. These legal professionals can help you learn more about your options, providing you with the information you need to make decisions about your irrevocable life insurance trust.

Source: www.palmbeachdailynews.com, "Should you end your irrevocable life insurance trust?" Gail Liberman, Jun. 23, 2013