The purpose of a life insurance policy is to ensure that your death does not leave your family members and loved ones in financial uncertainty. However, many people do not consider the impact of these policies on their estate. In many cases, a death benefit under a life insurance plan can quickly inflate the value of an estate. As a result, that estate may become vulnerable to federal estate taxes. Additionally, the government may take a portion of money that moves a gift.
One option to avoid these tax liabilities is to create an Irrevocable Life Insurance Trust. Anything that moves into a Trust is no longer the property of the original owner, which can shield that property from both the probate process and taxation. To establish a Raleigh Irrevocable Life Insurance Trust and create a plan to protect your insurance policy funds, reach out to an experienced lawyer.
One of the primary purposes of creating an Irrevocable Life Insurance Trust is to protect an estate from taxation. Although the state of North Carolina does not levy a tax on the value of an estate, this applies at the federal level. Estates that gain a substantial value through a life insurance benefit could surpass the federal estate tax minimums.
Placing a life insurance benefit into a Trust removes that money from a person’s estate. In other words, creating an Irrevocable Life Insurance Trust could help to lessen the value of an estate for federal estate tax purposes.
The second main benefit of creating an Irrevocable Life Insurance Trust in Raleigh is to shorten and simplify the probate process. When a person dies, the probate process functions to oversee the administration of their estate. This process evaluates a person’s Will, compares it with the state’s intestate laws, and distributes property accordingly.
The probate process has a reputation as being lengthy, expensive, and unpredictable. However, placing property in Trust makes those assets exempt from probate.
Accomplishing this is relatively simple. According to North Carolina Revised Statutes § 36C-4-401, creating a Trust only requires the following actions:
In Irrevocable Life Insurance Trusts, the property is a beneficiary’s right to collect payments under a life insurance policy. A dedicated local attorney can provide more information about this life insurance process and help to draft legally binding Irrevocable Trust documents.
A significant portion of an estate’s value may lie in life insurance benefits. It is essential to protect the value of these benefits from estate taxation and lengthy probate processes.
Creating a Raleigh Irrevocable Life Insurance Trust may be an effective solution. These Trusts can shield the benefits from federal estate taxes and help shorten the probate process. This means that a beneficiary can receive the full value of the property more quickly. Contact a knowledgeable attorney today to learn more about how these estate planning tools can protect your assets.