Thank u padthai.
That makes sense.
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Originally Posted by padthaiforlunch
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Ok. let;s assume an estate large enough to owe taxes. If the policy is owned by the mom, the estate will then owe taxes on the proceeds, as they are added to the value of the estate.
If the policy is owned by a trust, the estate owes no taxes on the death benefit.
I understand that point padthai, but gifting the 1m into a trust also reduces the estate tax exclusion so theres no net estate tax savings.
Getting 700k of income tax free gains and estate tax free gains makes sense.
But some of these guys were thinking that gifting the million in premium into the life ins trust would (in and of itself) reduce the estate tax which is totally wrong.
Last edited by GonnaFlyNow : 05-27-2009 at 12:17 PM.
Reason: Posts merged
I'm still curious about the $6M table 2 rating on an 84-year-old...
I apologize I did not see your question.
The premium was $5,388,085.93 guaranteed DB of 6,000,000.00 on a 84 yr old rated table 2.
With North American their table 2 is a 40% rate up on the COI. Had the contract been issued standard the premium would have been in the neighborhood of 5 million. Good question.
The premium was $5,388,085.93 guaranteed DB of 6,000,000.00 on a 84 yr old rated table 2.
With North American their table 2 is a 40% rate up on the COI. Had the contract been issued standard the premium would have been in the neighborhood of 5 million. Good question.
OK. now i'm realy confused.
I can understand turning 1m in premium to 1.7m of death benefit. But why turn 5.3 (or even 5.0) million in premium into 6m of death benefit?
Look at it this way. Estate value $10M. Gotta pay taxes on that. Take out a $1M life policy to pay for it.
Now the estate owes tax on $11M, unless policy owned by trust.
Originally Posted by GonnaFlyNow
thank u padthai.
That makes sense.
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I understand that point padthai, but gifting the 1m into a trust also reduces the estate tax exclusion so theres no net estate tax savings.
Getting 700k of income tax free gains and estate tax free gains makes sense.
But some of these guys were thinking that gifting the million in premium into the life ins trust would (in and of itself) reduce the estate tax which is totally wrong.
Can one of you explain to me how putting $1m in an ILIT or putting $5.3m in an ILIT reduces the estate taxes?
I understand that it reduces the size of the estate, but it also reduces the estate tax exclusion before money is being gifted into the ILIT. Am I wrong?
Maybe I'm confused.....if $5.3 million was gifted into an ILIT to pay for the policy, wouldn't they have to pay the tax on all money gifted after the exclusion, putting it over $6M total cost? Also, how does a $5M standard premium become $5.3M with a 40% premium increase? Seems like that would be closer to $7M in premium....
Either way, nice payday. Commission on that must have been ~$800k-1M. Compulife shows the target premium on that policy to be $684k at standard.
Can one of you explain to me how putting $1m in an ILIT or putting $5.3m in an ILIT reduces the estate taxes?
I understand that it reduces the size of the estate, but it also reduces the estate tax exclusion before money is being gifted into the ILIT. Am I wrong?
Am I typing clearly enough for you, pad?
Estate tax exclusion is different from lifetime gift tax exemption. Let's say estate tax exclusion by the time the insured dies is at 1M (currently 3.5 this year) and let's say the insured will have 3M worth of estate. If the policy and other assets are owned by revocable AB living trust it will increase the estate tax exclusion up to 2M (AB). The insured can give away 1M now into an irrevocable life insurance trust before she passes away using lifetime gift tax exemption. If she dies with 2M the estate will owe no estate tax. A lot of times ILIT is used to provide estate tax for the amount above estate tax exclusion due to illiquidity of the estate (e.g. business assets and real estate properties).
Maybe I'm confused.....if $5.3 million was gifted into an ILIT to pay for the policy, wouldn't they have to pay the tax on all money gifted after the exclusion, putting it over $6M total cost? Also, how does a $5M standard premium become $5.3M with a 40% premium increase? Seems like that would be closer to $7M in premium....
Either way, nice payday. Commission on that must have been ~$800k-1M. Compulife shows the target premium on that policy to be $684k at standard.
Very good question. Run the number that I gave you and see if you come out with the same thing. I personally use Winflexweb, but that should not make a difference.
Very good question. Run the number that I gave you and see if you come out with the same thing. I personally use Winflexweb, but that should not make a difference.
Compulife doesn't show table rating adjustments, but that's only a 6% increase for a table 2 rate? Something missing there.....and how can $5.3M be gifted into a trust to pay the premium without incurring a massive tax liability above the gift exclusion?
Compulife doesn't show table rating adjustments, but that's only a 6% increase for a table 2 rate? Something missing there.....and how can $5.3M be gifted into a trust to pay the premium without incurring a massive tax liability above the gift exclusion?
Go take it up with North American; or better yet have them run you an illustration.........LOL
I find it humorous that you are trying to argue with data that you have already said is in-conclusive.
What this particular client did is that he "gifted" $12,000 to 449 of his relatives, and they in return purchased his life policy. Pretty smart move!
In all seriousness this is not the case. There were several tax-attorney's that already put this plan together. they requested several quotes from agents around town, and I, according to them, was the most knowledgeable.
The client in question is a very wealthy individual; who owns several banks, in several different states. It was "his" trust department that came up with this plan
In this particular case I was the order taker, and more than happy to accommodate.
Do you know how they structured it? I'd be curious if there was some way to get around that....we have a client in a similar situation. Not nearly as old, but the premium would be massive and he's potentially looking at a lump sum payment instead of paying annually, but there would be a huge gift tax if he did it that way.
Do you know how they structured it? I'd be curious if there was some way to get around that....we have a client in a similar situation. Not nearly as old, but the premium would be massive and he's potentially looking at a lump sum payment instead of paying annually, but there would be a huge gift tax if he did it that way.
I will have to get back to you on that. I am positive that they set up inside an ILIT.
I am also positive that they set it up so that the premiums were paid by the bank; as some type of executive compensation. (The premium check was issued by his bank)
I will be taking my last semester of law school come August; and the one class I am looking forward to the most is Tax and Estate preservation. I will let you know how it goes.
I will have to get back to you on that. I am positive that they set up inside an ILIT.
I am also positive that they set it up so that the premiums were paid by the bank; as some type of executive compensation. (The premium check was issued by his bank)
I will be taking my last semester of law school come August; and the one class I am looking forward to the most is Tax and Estate preservation. I will let you know how it goes.
Bank issued check... hmmm. Premium financing...
Could easily have been part of the program. What better way to have it, controlling the bank, the Attorney's and large assets. I think it is called estate planning Chess.
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"A successful man is one who can lay a firm foundation with the bricks others have thrown at him." David Brinkley
That must have been a nice payday....what was the premium? Compulife shows the premium at standard rates for an 84 year old male at $4,613,000 as the lowest of all carriers with United of Omaha....a table 2 rate would effectively make the premium higher than the death benefit, which wouldn't make any sense.
To answer the original question, I show Aviva, West Coast Life, Sun Life, and Genworth that will do a SPUL for an 80 year old woman. At standard rates, Aviva is cheapest at $529k, next is WCL at $549k. At preferred, Aviva is $471k and WCL is $475k. Not sure about a SPWL, but I'd guess the numbers to be higher than either of those...
We handle all of the above cos. I'm with one post from earlier. Is this case underwritable?
Problem with SPUL is obviously age and the net amount at risk for most insurers.
Gary
Re: $1,000,000 SPWL for 80 Y.o. Female
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