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YOU CANT TAKE IT WITH YOU

329

Tom’s taxable estate Alice’s taxable estate Estate taxes due—Tom Estate taxes due—Alice Death benefits

= $3 million = $3 million = $753,000 (roughly) = $753,000 (roughly) = $1.5 million

One of the best ways to have your life insurance policy, but not actually own it yourself, is to have one of your heirs own the policy. If you have children, you could ask one of them to own the policy, which would cover your life and name all the beneficiaries you wanted. In order to pay for the policy, you could then gift that child the money necessary to pay the premiums (up to the maximum gift allowance per year), which would not only help provide liquidity at your death, but would also help lower the amount of your estate through your annual gifts. Plus, depending on how long the policy is in force, your total pre- miums paid will be much less than the death benefit.

Another way not to own your own insurance policy is to have your trust own it. We have already discussed the irrevocable life insurance trust, but by placing your insurance policy within your trust, you remove it from your estate, which will lower your taxable estate at your death.

SECOND-TO-DIE POLICIES

Perhaps your combined estate with your spouse isn’t very large, or you would like to use the marital credit when you pass away. If you leave your estate to your spouse when you die, you will be losing out on your ability to use the exclusion allowance for your part of your estate. This could mean that your heirs will have to pay a large amount in estate taxes when your spouse dies. By purchasing a second-to-die life insur- ance policy, you will help combat a potential large tax bill. A second- to-die, or survivorship life, policy covers both your and your spouse’s lives. However, no death benefit is paid until the second spouse dies. Therefore, if you and your spouse have a policy, and you die first, your

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