Estate planning in 2012

By Steve Savant

Ash Brokerage Corporation


The word is use it or lose it.

The very generous $5.12 million estate tax exemption equivalent goes away in 2013 if Congress doesn’t extend it this year. And, we have never seen a gift tax exemption as high as this.

So, if the client can afford to give it away this year then have them get it out of the estate this year.

Ideally, they can put it into an irrevocable life insurance trust and buy a whole lot of insurance. You may not need to avoid modified endowment contract status because the client does not have access to the cash anyway.

Alternatives to this type of estate planning are available. One idea is to create a private split dollar plan with the insurance benefit owned by the trust and the cash value owned by the donor. This is a bit complex and cannot be fully explored here.

However, the author can help you if you choose to message me. The result is that the policy can be unwound and the cash given back to the donor. This allows the donor to reverse the planning in the event they want to undo the trust planning later. This gets the life insurance benefit out of the estate, but not the cash value.

An intentionally defective grantor trust is used to overcome some income tax problems for the donor.