Serving Clients Throughout Southern California
Although we counsel our clients on the pros and cons of making a trust irrevocable, at times the needs of a particular family are well served with an irrevocable trust. This is a trust in which the terms are cemented to some degree at the time the trust is created.
If you need to consult with an irrevocable life insurance trust attorney in Carlsbad, we are here for you.
Common areas to use such trusts are:
- Life insurance for tax reasons
- AB trusts where spouses divide their assets to maximize the tax deduction
- Asset protection
Irrevocable Life Insurance Trusts
Life insurance. Young professionals with a new family usually carry some form of life insurance. These trusts do not automatically need to be irrevocable. Sometimes the creator does not wish the terms to ever be subject to change.
Many different forms of life insurance are available to protect a family, one policy may not meet all of your needs. Some policies protect a family from the loss of the breadwinner while others serve as working assets.
In recent years, many life insurance policies were set up in an irrevocable trust to be used for a specific purpose such as to pay estate taxes or to create a legacy. In either event, unexpected events may occur. If your family has such a trust, we can assist in administering this trust within the limits of the terms. Understanding these terms for their precise application is at times difficult for the untrained eye.
No matter if you have an existing trust that needs to be administered or wish to set up a trust for a specific purpose, we are pleased to assist. You can rest assured our fees will be moderate.
Some of these irrevocable trusts are set up for educational taxes or charitable purposes. We can assist you with an irrevocable life insurance trust.
AB Marital Trust
These AB trusts were set up to double the amount of the deduction allowed to pass an estate free of inheritance taxes. Over the years, the deduction has increased from $650,000 per person to the current amount of $5 million. At the lower rate these trusts were a very popular method to decrease taxes on estates ultimately passing to children.
When the first spouse expired, half of the estate oftentimes became irrevocable. In recent years, we have seen an increase in cases where the surviving spouse has remarried or experienced a change in life that causes him or her to change the terms of the irrevocable half of the trust.
Asset Protection Trusts
Over the past several years, many attorneys have conducted asset protection seminars. One method of protection they suggest is the irrevocable asset protection trust. Unfortunately, the events of life do not always go down the planned course. We can assist in the creation of such a trust if it's going to fit your situation or can help in the administration of such a trust so as to work out the best possible solution to a trust that might be out of step with current family needs.
We maintain offices in Carlsbad where we have maintained offices since 1977. We can help you make sure your family or the charity of your choice is taken care of properly. At The Law Offices of Rickard L. Borg, we have been helping California families with their estate planning concerns for over 37 years. Let us help you with your life insurance payouts today.
A Practical Approach to Finding Solutions
When making a decision regarding a life insurance trust, make sure you coordinate the drafting of the trust with the activation of the policy. As with any irrevocable trust, caution should be exercised as it is irrevocable and non-amendable, which means you will not be able to make any changes once you have developed the trust. Therefore, an examination needs to be conducted to remove the remote possibility that the proceeds will be held in vain.
When you take out a life insurance policy without setting up a trust, it will be subject to estate taxes. If the policy is owned by your spouse or children, you can avoid estate taxes, but you will lose control over how the policy is distributed. And while you avoid taxes on your estate, the funds will be taxable as part of your beneficiary's estate.
You can avoid these complications by setting up an irrevocable life insurance trust along with your life insurance policy. The IRS will only recognize your life insurance trust if you live for three years after you transfer assets to the trust, but once that time has elapsed, your policy will not be subject to taxes.
With the increase in the estate tax deduction to $5 million, estate taxes are not as big a concern as they were prior to 2010. However, there are still needs for irrevocable trusts, and in the event you have an existing irrevocable trust that needs to be administered, we will send out the proper notices to commence the distribution process.
Contact a Carlsbad Life Insurance Policy Attorney
Even when you try to protect yourself by taking careful estate planning measures, there are pitfalls out there. We can help you avoid them. From our offices in Carlsbad, our lawyers offer evening and weekend appointments in addition to our weekly business hours. Call us at 760-729-2313, or contact Marge, Vanessa or Rick today to schedule a consultation.