Thursday, October 15, 2015
If an estate reaches a certain dollar amount estate taxes can be levied on that estate by the IRS. Coming up with the funds to pay the estate tax can become a headache for the executor. Estates that run into this problem often have to sell off property at bargain prices to raise the money needed for the estate tax. One solution to prevent this problem involves creating a life insurance policy to pay the estate taxes. It is becoming common for large estates to set up irrevocable trusts that are then used to purchase life insurance on the donors. The life insurance proceeds are then used to pay part of the estate taxes. Life insurance can be an important indispensable tool for clients that expect their estate to owe an estate tax.
See Mark P. Cussen, How Life Insurance Can Help Reduce Estate Taxes, Investopedia, October 15, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.