 |
 |
 |
||||
 |
||||||
 |
||||||
 |
||||||
 |
||||||
 |
||||||
|
Insurance Trusts The Insurance Trust, an irrevocable, inter vivos trust. Specific Purpose: To hold an insurance policy for the purposes of creating a fund from which any Federal Estate Tax due upon death of a wealthy family member may be paid. Placing the insurance benefits in a irrevocable trust prevents the insurance benifits from being added to the grantors estate which would increase the amount of federal estate tax's due. In order to avoid this the Insurance Trust must be the owner, pay the premiums and be the beneficiary of the insurance funds. Insurance agents frequenly fail to let their clients know that although no income tax is paid on the proceeds of a life insurance policy, unless it is separated from the estate in an irrevocable life insurance trust, the amount of the policy is considered part of the estate for federal estate tax purposes. Provisions may be made in this trust to cover other expenses such as education of certain beneficiaries, debts of certain beneficiaries, emergency funds and etc. or the funds may be distributed to named beneficiaries of the trust pursuant to the terms of the ‘governing instrument.' Insurance proceeds may be invested to develop a retirement account for the specified beneficiaries. As long as the trust "holds" the funds deposited therein and pays those expenses stipulated in the "governing instrument" there is no tax liability--no federal estate tax or other tax until such funds are paid directly to Mr. John Doe or Miss Jane Doe. Special Provisions: The creator of this trust drafts a "contract" which becomes the "governing instrument" of the trust. This "governing instrument" is otherwise known as the indenture, the declaration of trust or the contract agreement. If the specific provisions are written in the "governing instrument" then those provisions apply. If there is no provision covering a certain circumstance then the statutes apply. Refer to the instructions related to a 1041 income tax return (the returns filed by trusts) to verify this statement. Trustee: The Board of Trustees may consist of one person or as many as the creators may desire. Lord & Carter recommends from 3 to 5 members on the board of trustees. The signing power for purposes of banking transactions may be operable with one signature or may require two signatures as required by the "governing instrument." The trustee may appoint a manager to fulfill certain accounting duties. In order to maintain the trust as irrevocable there must be an unrelated trustee; an adverse trustee, one who has a small financial interest in the trust estate, and a third trustee who may be one of several beneficiaries. The sole beneficiary may not be the sole trustee. Beneficiaries: In FDIC insured banks accounts are insured up to $100,000; however, trust accounts are insured up to $100,000 per beneficiary as long as the beneficiaries are registered with the trustee.
|
Types of Trusts
|
|||||
 |
 |
 |
 |
 |
 |
 |
 |
||||||
 |
||||||
