Estate Planning Considerations

Helping to Keep Financial Futures Secure Since 1976

Other Advantages of Life Insurance
in an Estate Plan

In addition to serving as a source of estate liquidity, life insurance provides a variety of other advantages:

Payment is prompt and certain. Life insurance proceeds are not subject to the time and expense of the probate process.
The event creating the need for cash -- death -- also creates a source of cash -- the life insurance death benefit. The life insurance policy provides the dollars for a certain need -- estate settlement costs -- that arises at an uncertain time -- death.
If the death benefit exceeds the total premiums paid, this gain generally is received free of income tax. For example, if only 20 cents of each death benefit dollar received has been paid in premiums, the 80-cent gain is received income tax free!
The premium payments are spread out and not required in nine months.
Life insurance avoids all of the problems associated with the other methods for paying estate settlement costs.
By giving up ownership of the policy, the proceeds may be estate tax free. An attorney can provide you with the popular "Irrevocable Life Insurance Trust" for this purpose, or an adult child can be named as owner.

For these reasons, life insurance is frequently
the most economical - and popular - method
of providing needed estate liquidity.

Estate Planning Insurance Considerations Action Checklist

Now...

Depending on your situation, complete a detailed estate analysis or, alternatively, an analysis of your estate liquidity needs.
Purchase life insurance to pay for your estate settlement costs.
1. You may wish to have the insurance owned by an adult child, or by an Irrevocable Life Insurance Trust. Either of these techniques may be able to keep the insurance proceeds out of your estate, if properly implemented.
2. When using a survivorship policy, you may wish to retain ownership in order to use insurance cash values, if needed. The policy can be moved out of the estate by giving it away after the first spouse’s death. If, however, death occurs within three years of the transfer, the proceeds will be included in the surviving spouse’s estate.

Short-Term

?Consult with your attorney to verify that your estate is arranged to take best advantage of the unlimited marital deduction, which allows estate taxes to be deferred until the death of the second spouse. This planning might include use of a Credit Trust provision in your will. This is also known as a Family or a By- Pass Trust.
Review current wills and trusts to determine if they will operate as intended under the provisions of the 2001 Tax Relief Act.
Review the issued policy.

Longer-Term

Your estate plan, including wills, trusts and life insurance, should be periodically reviewed to ensure that it continues to meet your needs and objectives.

Important Information

The information, general principles and conclusions presented in this report are subject to local, state and federal laws and regulations, court cases and any revisions of same. While every care has been taken in the preparation of this report, neither VSA, L.P. nor The National Underwriter Company is engaged in providing legal, accounting, financial or other professional services. This report should not be used as a substitute for the professional advice of an attorney, accountant, or other qualified professional.

Life insurance contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. All contract guarantees are based on the claimspaying ability of the issuing insurance company. Consult with your licensed financial representative on how specific life insurance contracts may work for you in your particular situation. Your licensed financial representative will also provide you with costs and complete details about specific life insurance contracts recommended to meet your specific needs and financial objectives.

U.S. Treasury Circular 230 may require us to advise you that "any tax information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent tax advisor."