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How Life Insurance Trust Reduces Your Estate Taxes

We all know that the role of life insurance is to provide to your beneficiaries after you die. This benefits those families that rely heavily on your earnings for their living. There is always a concern of paying high life insurance tax in many people. We will have a look at how you can ensure that your beneficiaries keep more of the money. The best way to accomplish this objective is by forming a restricted property trust life insurance as it works to keep taxes down.

This is made necessary by the fact that your death benefit may be included in the summation of your estate value. If happens, your estate value may be pushed high beyond the exemption levels thus bringing in the risk of high taxation. Therefore you will find that your life insurance may cost your family a lot of their money. Therefore your family will have to pay estate taxes at a very high rate that ranges from 35 to 55 percent of the total value of your estate.

The taxes are required to be paid within a short period of nine months after your death which is highly stressful. By looking at all that, you will the need of having an irrevocable trust to help escape the taxes, for instance, the restricted property trust life insurance. The restricted property trust life insurance is an arrangement that helps the wealthy in the society to reduce the taxes they have to pay. Let us now have a look at how the arrangement helps to reduce the estate taxes.

The method of working of the restricted property trust life insurance is by selling your life cover outright to your trust. The trust will then be paying the premiums, and after you have passed away, it will hand over to your family the death benefits. This will then help to keep the size of your estate down as the ownership of the life insurance is shifted from you to the trust thus reducing the value of your estate. You will therefor have a lower amount of estate tax to pay as the value is driven down.

You will thus enable your family to keep more money as the value of your estate will be drawn down to the federal taxes level. The formation requires that you look for an attorney who will assist you with the formation. You will be assisted on how you will form the trust, and then from there you can choose a trustee to oversee its affairs. The restricted property trust life insurance is best when you select a bank to oversee over your trust.

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