Tampa Life Insurance Trust Attorney
Many people who own a life insurance policy understand that when they pass away, their spouse (usually the named beneficiary of the life insurance proceeds) will not have to pay taxes on the life insurance income, as spouses qualify for an unlimited marital deduction. However, when your spouse eventually passes away, any assets from your life insurance policy are subject to estate taxes. There is a workout to this issue: placing your life insurance in an irrevocable trust. The Tampa life insurance trust attorneys at Strategic Counsel Law Group, L.C. can assist you with this process, as well as offer additional methods of shielding your and your spouse’s estate from potential estate taxes, which are set to impact more people starting in 2026.
All of one’s assets are assessed at fair market value when determining the value of their estate, which can include mutual funds, stocks and bonds, real estate, bank accounts, and other assets. Currently, only estates worth more than $12.06 for an individual and $24.12 million for a couple are subject to estate tax. As such, less than 0.1 percent of people have to worry about paying estate taxes. However, the current estate tax cut created in 2016 is set to conclude in 2025. As such, in 2026 the estate tax threshold will revert back to $5.49 million for an individual and twice that ($10.98 million for a couple).
Life Insurance Trust Proceeds are Not a Taxable Part of Your Estate
A life insurance trust, as opposed to traditional life insurance policy, does not count towards the individual’s taxable estate because once the policy is placed in the trust, it technically no longer belongs to the individual.
How a Life Insurance Trust Works
- An irrevocable trust is created.
- You cannot be the trustee of this type of trust. Another party, such as a bank, must be named the trustee of your life insurance trust
- The trust must be established three or more years before you pass away.
- The proceeds of your life insurance policy are paid into the trust when you pass away.
- The trustee pays your beneficiaries.
- Your estate avoids taxation on these assets.
While you no longer own the life insurance policy or the proceeds, a life insurance trust does enable you to say who the beneficiaries are, how they will be paid, who the trustee shall be, and how premiums will be paid (you will retain the ability to pay the premiums yourself if you so choose).
Call a Tampa Life Insurance Trust Attorney
Placing your life insurance policy in an irrevocable life insurance trust is just one option for reducing your taxable estate. There are many other legal tools we can use to shield your high-net-worth estate from taxation, as well as from potential creditors. To learn more about your options, we urge you to contact the Strategic Counsel Law Group, L.C. at 813-286-1700 to schedule a free consultation with one of our experienced Tampa life insurance trust attorneys today.