Is there a benefit of having a life insurance trust if an estate is less than $2.5 million?

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Is there a benefit of having a life insurance trust if an estate is less than $2.5 million?

My understanding is that an estate, including the proceeds from life insurance, can be passed to beneficiaries free of estate taxes as long as the total value of the estate of the deceased is less than $5 million. Is that correct? If so, is there any benefit to maintaining an irrevocable life insurance trust if my estate would be, at most, $2.5 million?

Asked on April 3, 2012 under Estate Planning, California

Answers:

Steven Fromm / Steven J Fromm & Associates, P.C.

Answered 9 years ago | Contributor

The correct amount of the federal exemption equivalent is $5,130,000 per person in 2012.  But in 2013 the law will reduce this amount to only $1 million.  There is talk in Congress to raise this amount for 2013 and thereafter so no one knows for sure.  You really should sit down with an experienced estate planning attorney to get your estate plan done corrrectly.  For more on this please read Estate Planning Mistakes: 5 Not So Easy Pieces at the following link: http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html


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