Distributing Assets Fairly and Equitably
The “estate” of most individuals is worth more than just money. A family business, a summer cabin on the lake or an antique car collection may be part of a legacy rich with family history.
Individuals are often unaware of what the potential planning needs are and may not see the hidden stresses involving distribution of family assets, both tangible and intangible. These assets may not be easily dividable, may have fluctuating values and lack liquidity as well as potential tax liabilities.
The goal of an estate plan that involves estate equalization is to balance the desires of the parent(s) making bequests to certain individuals and the desire to maintain an equitable value to each heir.
Estate Equalization with Life Insurance
While there are multiple scenarios for utilizing life insurance that involve gifting and certain trust arrangements to keep the death benefit from being included in an estate for estate tax purposes, ultimately the life insurance proceeds can provide a cash equivalent to a portion of a non liquid asset transferred to another beneficiary.
We often think of using estate equalization techniques when a business owner has several children or heirs with differing involvement in the business. However, the same techniques can work when there is no business interest, but “differing interests” is still the key factor.
Why Premium Financing?
Using an alternative means to acquire life insurance through a Legacy Trust may provide an attractive alternative for getting the benefits of life insurance without potentially jeopardizing your assets' ability to earn interest.
This approach has the added benefit of being tax efficient: The funds that the trust borrows to pay the annual premiums and interest expenses generally are available free of gift taxes.