An irrevocable life insurance trust (ILIT) gives you more control over your insurance policy and how your beneficiaries will get the death benefit when you die. A life insurance policy is an investment and an asset. So, it will be part of your estate after you die. Because of this, the death benefit, or proceeds, can be subject to an estate tax if all of your assets are worth more than the federal exemption limit.
How ILITs Work
In estate planning, a trust is a separate entity that holds your assets, such as money, real estate, and personal items. So that they can be given to your heirs after you die. An ILIT is a trust that you can’t change your mind about. It holds your life insurance policy for you so that it doesn’t count toward your taxable estate.
The trust is the policyholder, so you don’t have to worry about anything to do with ownership. The death benefit is no longer part of your estate and does not add to the value of your estate for tax purposes. It also won’t have to go through probate, which is the legal process of getting your estate in order. Your heirs can get the full amount of the death benefit. Here’s the process:
You set up your ILIT
You give your existing life insurance to the trust, or you have the trust “buy” a new policy. Then you put money into the trust so it can pay your premiums.
The trust is the beneficiary of your life insurance policy. So when you die, the policy pays the death benefit to the trust. The benefit is not counted toward your estate tax.
The ILIT will give your trust’s beneficiaries the death benefit based on your instructions. Which are written in the trust document.
Setting Up An ILIT
ILITs are hard to understand and have many tax effects. When setting up a trust, it’s important to talk to an attorney to make sure it’s done right and works to your advantage. Once you’ve started putting together the trust you’ll find there are 3 designations that need to be made:
Grantor – You, the person who makes the trust
Trustee – The person you elect to manage the trust for you
Trust Beneficiaries – The people you have chosen to receive your assets listed in the ILIT after you have passed away
To actually set up the ILIT you have a few steps. First, you open and finance the ILIT and fund the trust to keep up with the premiums for your life insurance policy. Second, you’ll transfer or buy a new life insurance policy into the trust. Lastly, you’ll select a trustee and choose how the ILIT will distribute the benefits. Be careful as these instructions can not be changed later.
Benefits Of ILITs
Using an irrevocable life insurance trust can help you save on taxes and give you more control over how the death benefit from your life insurance is used.
Minimizing Estate Taxes
If you have a life insurance policy when you pass away, the death benefit is considered an asset. So, it is added to the total value of your estate. However, if you put the life insurance into an ILIT, the money from your death benefit would not be counted as part of the estate and will not face taxes. If you don’t include your life insurance, you may also be able to lower the total value of your estate before the federal exemption level and avoid paying taxes on it.
Death Benefit Can Pay Estate Taxes
All of the money and things you own make up your estate. If your estate is worth more than the amount the law says is exempt, federal estate taxes will have to be paid. In 2020, the amount that won’t be taxed is $12.92 million. This means that a person can leave $12.92 million to their heirs without having to pay any estate taxes at all. Also, if the two people are married, the exemption would double to $25.84 million. If the trust is set up right, the money from your death benefit can be used to help pay taxes on your other assets.
For example, let’s say you have a $15 million estate made up of real estate, retirement accounts, and stocks. Your beneficiaries would have to pay estate taxes for that amount. Your trustee could pay that tax with the money from your death benefit. This lets you beneficiaries get the full value of all other assets outside of the ILIT.
State Estate Taxes
Even if you don’t have to pay the federal estate tax, depending on where you live, you may still have to pay the state estate tax. When compared to the federal level, the amounts that are exempt from these estate taxes are much lower. Here are the states that charge an estate tax and their asset exemption limits:
Connecticut – $12.92 million
Hawaii – $5.49 million
Illinois – $8 million
Maine – $6.41 million
Maryland – $5 million
Massachusetts – $12.92 million
Minnesota – $3 million
New York – $6.58 million
Oregon – $1 million
Rhode Island – $1,733,264
Vermont – $5 million
You Control The Benefits
With a trust, you, as the grantor, can give specific instructions about how the death benefit will be used. Usually, the beneficiary gets the money from a death benefit in one lump sum or several payments over a set amount of time. With an ILIT, you can give extra instructions. Like holding back money if the beneficiaries are too young. Or even setting aside portions of the money into investment accounts that can be accessed later. Having the money from a life insurance policy owned by an ILIT can help protect the benefits of a trust beneficiary who gets government help. Like Social Security disability income or Medicaid. The Trustee can keep a close eye on how the trust’s money is spent so that it doesn’t affect the beneficiary’s ability to get government benefits.
Disadvantages of ILITs
ILITs could help people reach certain tax and estate planning goals, but ILITs can also have the following problems. Before starting an ILIT, think about these things.
No Modifications
Once you give your life insurance policy to an ILIT, you can’t give it to another trust or entity. This is because you’ve given up all rights to your coverage. Imagine you set up an ILIT and named your spouse as a beneficiary. After a few years, you get a divorce and want to take your spouse off the policy. There is no easy way out of this situation unless specific language was added before the trust was put into action.
Potential Taxes
If you die within the first 3 years of setting up your ILIT, the trust’s life insurance policy may be automatically added to your estate. If the payout from your life insurance is part of your estate, it could be taxed along with the rest of your assets.
You Don’t Own Your Life Insurance
With an irrevocable life insurance trust, the policy is owned by the trust and not by you. Most of the time, you can’t change your life insurance policy after you set up an ILIT. Your trustee is in charge of making sure that your policy is managed and paid out according to the rules of the trust.
Choosing Life Insurance
If you are setting up an ILIT and choosing a new life insurance policy at the same time, you are in a great position to choose the best policy for your needs. This could be a term policy, which lasts a specific amount of time. However, it’s more likely with an ILIT that you will choose a whole life policy. The good news is, there is no rule about what kinds of life insurance you should include in your ILIT. To make sure you get the results you’re aiming for you may want to work with a lawyer, a financial advisor, and an insurance agent. Among the three, you’ll make sure all your bases are covered when you set up your ILIT.
Who Should Get an ILIT
ILITs are best for people with a high net worth who want to avoid paying higher estate taxes if they don’t have to. Parents who want the money to go to their minor children can also use an ILIT. This makes sure that the money goes to care for their children and doesn’t get stuck in court.
Most people won’t need to include the complexity of an ILIT in their end-of-life planning like paying for a funeral or cremation. So a strong will, a revocable trust, and an insurance policy will be enough for their estate plan. Since the trust can’t be changed once it’s set up. It’s best for people who have special needs when it comes to estate planning.
Working With EZ
Your family will still have bills to pay after you die, and they will need your help more than ever. The last thing you want them to worry about while they are grieving is money. There are many great options for low-cost life insurance that will give your family enough money for a low monthly price. Working with an agent who specializes in life insurance is the best way to find the right policy for you and your needs. At EZ.Insure, we know that you and your family want the best coverage but we also know you have to stay within your budget.
So, we will do everything we can to find you the best policy at the best price and we want to make it as easy as possible for you to do so! We’re here to help, and the best part is that everything we do is free. We will help you with everything, from answering all of your questions to helping you choose a policy and finish the enrollment process. We will also help you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.
Life insurance is an important way to ensure your families stability if anything should ever happen to you. Oftentimes you will need to go out and get a life insurance policy on your own. But sometimes your employer will provide you with a life insurance plan through their company. This is known as a group life insurance policy. If your employer does offer a group life insurance plan you might be thinking ‘great now my family is covered’. But is it really good enough to have just a group life insurance policy?
It might not cover everything your family needs. Even with this plan you might need to consider also getting an individual life insurance policy. In order to know which plan is best for you, or if you need both you will need to weigh the pros and cons of both types of plans against your lifestyle and needs.
Group Life Insurance
Most of the time when looking for life insurance, you have to fill out an application. If you’re accepted, you can buy a policy that covers you. Group life insurance is different because it is given to a group, like a company’s employees. With a group policy, employees usually get a base amount of coverage and, in some cases, the chance to add more coverage by taking it out of their paychecks. One important thing to remember is that this kind of group coverage usually only lasts as long as you work for that company. If you leave your job, you might not be able to keep your group life insurance policy.
Group Life Insurance Pros and Cons
The advantages of group life insurance are that there is no medical underwriting, or very little if any. If your employer has a group policy, you may be able to get insurance without having to answer questions about your health. Or get a physical as your employment makes you eligible. Most of the time, group life insurance is a simple offer that can be accepted without any questions about your eligibility. And more than likely it shouldn’t cost you anything. If a company advertises life insurance as a benefit for employees, they will usually pay for the premiums.
Now the downside of group life insurance is that there may not be enough protection within the plan options. You also often do not get to pick how much coverage you receive. It is up to the company you work for. The amount of coverage you actually need depends on your life and personal responsibilities. But a good rule of thumb is to think about how many years of your income you’d like your family to have if you died. You will need to compare that to the amount of coverage your group plan has offered. Then decide if you need to get additional coverage or if your group plan is enough.
Also remember after leaving a company, there is a chance you could lose your life insurance policy. Some group policies end when you leave the company, but there are others that are “portable,”. Which means you can turn a group life insurance policy into an individual policy. You will need to look over the details of your plan or speak to an agent to find out the specifics of your life insurance coverage.
Individual Life Insurance
Life insurance is essentially a contract between an insurance company and you. It says that in exchange for a monthly premium, when you pass away the life insurance company promises to pay a set amount of money to your beneficiary, or beneficiaries. With individual life insurance policies, you purchase them on your own and you can choose either a:
Term life insurance policy – This is the most common type of life insurance and generally the most affordable. You choose a specific duration of coverage typically between 10-30 years. Your premium will remain the same throughout the entire term. If you pass away during the term your beneficiaries will receive your death benefit tax-free. If you outlive your policy, you may be able to extend coverage in 1-year increments. There are also some types that will let you convert to a permanent life insurance policy.
Permanent life insurance policy – This type of policy, also known as traditional life insurance, is guaranteed to remain in effect for your entire life, as long as you stay up to date on your premiums. In addition to giving your beneficiaries a death benefit when you pass away these policies also often come with a savings component. Meaning as you pay your premiums you will start to build a cash value that also increases with interest. With enough cash value your policy can actually begin to pay for itself from the savings component.
Within these two types of life insurance are several subtypes. Giving you a large variety of options to find a plan that is perfectly suited to your needs.
Individual Life Insurance Pros and Cons
Even if you have group life insurance, it’s a good idea to learn more about individual term life insurance as well. First you will need to figure out what kind of life insurance you need. Then weigh the pros and cons of each. For pros, when you buy a life insurance policy for yourself, you can take it with you wherever you go. As long as you pay your premiums, your policy is good. It doesn’t rely on you staying at the same job as your group life insurance. Other benefits include:
Choosing how much coverage you want and how long the term lasts. Death benefits from term life insurance can range from $50,000 into the millions, with policies lasting anywhere from 1 for 30 years.
Younger and healthier enrollees generally have lower premiums, and if you buy a level-premium term life insurance policy your rate will never go up while the policy is in effect. Meaning the younger you are the easier it is to lock in a more affordable rate compared to buying when you’re older.
As for the cons, you have to pay for it out of pocket. The rate you pay will depend on how healthy you are and lifestyle. People who are older, not in great health, and smoke cigarettes are likely to pay more for their insurance compared to a younger, healthier person who doesn’t smoke.
Additionally, you can be turned down after applying for your policy. During the process of underwriting, insurers do a risk analysis. Which weighs out how risky it is to insure you. Meaning they might not give you a policy if something in your past raises a red flag and makes you too much of a risk.
Do I Need an Individual Life Insurance Policy If I Already Have A Group Policy?
When deciding on the amount of coverage or how many policies you need, it’s important to consider any dependents you may have. For example, if you are single, healthy, and have no dependents you’re less likely to need extra life insurance. As long as your group policy covers your current debts and any funeral expenses, you should be ok with just a group plan.
On the other hand, if you have a family you need to take them into consideration. Suddenly losing your income due to your death can be a scary situation especially when you are the sole provider of your family. If your family relies on your income and would have trouble paying bills without it, an extra life insurance policy is a smart investment. It helps you ensure that between the death benefits from the group policy and your individual policy all of their needs will be met.
If you do need extra coverage, one thing to look into is whether or not the insurance company your employer has chosen offers extra life insurance. Meaning you can raise your death benefit and pay the difference of raising it. This can be a cheaper way to add coverage to your current policy without having to go through underwriting since you already have the policy through your job.
Another thing to consider is the type of group policy you have. If your employer’s group life insurance is a term policy, you might be better off with an individual whole life policy. This is because you can outlive your term policy and end up having no death benefits when you pass away.
Working With an EZ Agent
It’s important to remember that your needs for life insurance will probably change as time goes on. A few things that can cause a change with your life insurance policy would be aging, number of dependents, health status, and job status. The choices you make about life insurance today aren’t set in stone. You can add or take away policies in the future. Just keep in mind that as you get older, you are more likely to have health problems and have to pay a higher premium.
Everyone has their own needs, priorities, and ways they can spend their money. At EZ.Insure, we know that you want the best coverage for you and your family. But you also have to stick to a budget. That’s why we’re committed to finding you the best policy at the best price, and we want to make it as easy as possible to do so! We’re here to help, and the best part is that everything we do is free. We will help answer all of your questions as well as help you choose a policy and finish the enrollment process. We will also continue to assist you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.
So you’ve finally decided to get a life insurance policy? Good choice! But now that you’ve applied for a policy, are you worried about the time it will take for your policy to go into effect? Don’t worry, you do have an option for immediate coverage: temporary life insurance. Find out how much it costs, how it works, and if it will work with the kind of coverage you’re looking into.
What Is Temporary Life Insurance?
While waiting for your life insurance policy to kick in, you have the option of buying temporary life insurance.
In some cases, it can take 4 to 6 weeks for you to be approved for an underwritten life insurance policy; your policy won’t go into effect until you’re approved and make your first premium payment. But you do have an option for that interim period: your insurer will ask you if you would like to purchase temporary life insurance. Having one will mean that you will have insurance coverage throughout the underwriting process.
The maximum amount of coverage that you can get depends on the life insurance company that you work with, but generally, you will be able to purchase up to $500,000 of temporary life insurance coverage.
How Do You Get Temporary Life Insurance?
If you want to get temporary life insurance while you are waiting for your coverage to begin, you will need to complete an additional step in your application process, and get a receipt. Your insurer will provide you with their explanation of coverage, as well as when your temporary life insurance will begin and end.
How Long Does a Policy Last?
If you choose to request temporary life insurance coverage during your underwriting process, the temporary coverage will end:
If you are denied life insurance
If your application is approved, once your policy is issued and your coverage has begun
5 days after you end your life insurance coverage, or request a premium refund
A specific day stated on your temporary insurance agreement, which is usually somewhere between 60 and 90 days after you have applied for life insurance
Do You Qualify For Temporary Life Insurance?
While temporary life insurance coverage does not require the extensive underwriting process that a more permanent policy does, you will still need to qualify by answering some basic questions. In order to qualify for temporary life insurance, you’ll most likely have to answer questions about things like your age, basic medical history, and current medical condition. But there is no need to worry – as long as you’re under the age of 70 and don’t have any major medical conditions, temporary life insurance will be available to you.
You will have a single premium payment, that will go towards your life insurance policy once it is approved.
How Much Does It Cost?
When you apply for a life insurance policy, your insurer will ask you to include the first month’s premium with your application. This premium payment will go towards your temporary life insurance; the price will be based on your initial quote, and won’t cost anything more than a single payment. If you’re approved by the insurer and accept their offer of life insurance, the payment you made for the policy will be credited toward the first month’s premium for your actual policy.
Your family has financial obligations that will not go away when you are gone; they will need your help more than ever with their expenses, and the last thing you want them to worry about is money while they are grieving. There are many great affordable life insurance options to choose from that will provide enough money for your family, for a low monthly price. The best way to find the right life insurance policy for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
If you take care of a loved one, know that you are not alone. One recent study shows that 43 million Americans are currently acting as unpaid caregivers for a loved one. This can create a large financial burden on you and your family, but one way you can be sure that your family will be financially secure and still able to care for your loved one, even if something happens to you, is by purchasing life insurance.
The Cost of Caregiving
The cost of caring for a loved one is almost $7,000 a year!
If you are caring at home for a loved one, you’re probably dealing with a lot of extra expenses, including the costs of their prescriptions and any home modifications necessary to make them feel comfortable. AARP estimates that the out-of-pocket cost of caring for a loved one is almost $7,000 a year, and the inflation we are currently dealing with will certainly do nothing to help.
And it’s not just the expense of caring for a loved one: you also put a lot of time and energy into helping your loved one bathe, feeding them, and providing any other care that they need, which would be expensive if you were to hire someone else to do it.
The Toll Caregiving Takes On Your Job
Taking care of a loved one comes with responsibilities that can leave you stretched financially, but unfortunately, you might have to take time off of work (which will generally be unpaid), if the bulk of the caregiving falls on you. A lot of employers will offer flexible leave, but it won’t last forever. This can take a toll on your paycheck and your career: in fact, nearly a quarter of caregivers have to stop working entirely when taking care of a loved one, and opt for early retirement.
Doing this could mean taking a hit to your nest egg, and could make it harder to save for the future of your own family. But having a life insurance policy is an affordable way to make sure that you have enough money to pass on to your family, especially if you’ve chosen to take early retirement.
A recent survey found that nearly a third of caregivers go without routine physical or dental care, or skip or postpone treatment.
When you’re taking care of someone, it’s easy to focus all of your attention and time on them, and not on yourself. A recent survey found that nearly a third of caregivers go without routine physical or dental care, or skip or postpone treatment. But it’s important to learn to take care of yourself, as well!
Taking better care of yourself means finding ways to relieve stress and worry less, and one way you can do this is by purchasing life insurance coverage. Having a policy will give you the peace of mind that comes with knowing your loved ones will be safe and secure in the future. And the best way to get an affordable policy is to make sure you’re in good health, so take good care of yourself!
The best way to find the right life insurance policy for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
There are many misconceptions about life insurance, and these misconceptions can turn people off from even looking into purchasing a policy. In fact, a lot of people are just plain confused about life insurance! To help clear things up, we want to talk here about what life insurance is not, in order to help give you a better understanding of this subject, and address some of the misconceptions you might have about it.
1. Life insurance is not a luxury item
Although it might seem like life insurance is only for people who are well-off, it isn’t. Life insurance is not a luxury item, even though many people think it’s too expensive to fit into their family’s budget. In fact, nothing could be further from the truth: life insurance can often cost the same as a monthly subscription to a music streaming service, or a meal at a restaurant.
2. Life insurance is not just for covering funeral expenses
Yes, many people purchase life insurance specifically to cover funeral expenses, but life insurance can cover so much more. Funerals can cost around $10,000, but even some of the most affordable policies can offer much more coverage than this, meaning they can help with replacing lost income, making mortgage payments, and raising children.
3. Life insurance through your employer is not enough
A lot of people don’t purchase life insurance because they have a policy through their job, and they think they are fully covered with this employer-based life insurance. And don’t get us wrong: employer-based policies are great because they are often very affordable, but they’re usually limited to providing coverage equal to only one or two times your salary, or a fixed amount like $100,000. Research, though, shows that you should have coverage that is five to ten times your income. Not only that, but you will lose your coverage if you leave the job or are terminated. You can consider keeping your life insurance policy through your employer, as well as purchasing a private policy to make up the difference.
4. Life insurance is not just for healthy people
Life insurance is indeed cheaper when you are healthier and younger, but that doesn’t mean you can’t find an affordable policy if you aren’t young and healthy. Even if you have certain health conditions, like diabetes or high blood pressure, it’s still possible to qualify for a great policy, as long as your medical conditions are under control. And if you are worried about qualifying for a policy, know that there are policies available to you that do not require a medical exam or medical questions.
Hopefully, all of this has cleared things up for you, and has shown that life insurance is for everyone, and is affordable. Because remember, your family has financial obligations that will not go away when you are gone; they will need your help more than ever with their expenses, and the last thing you want them to worry about is money while they are grieving. There are many great affordable life insurance options to choose from that will provide enough money for your family, for a low monthly price.
The best way to find the right life insurance policy for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
It’s no secret that the price of everything has been steadily rising, making it harder and harder to afford even simple things like gas and groceries. And inflation doesn’t seem like it’s going to ease up anytime soon, leaving many Americans worried and afraid – and rightfully so, since it’s not easy to deal with these rising costs.
And here’s another problem: what if you want to financially protect your family in these challenging times with a life insurance policy? As the price of everything rises, will premium rates also go up? The answer depends on whether you already have a policy or not, and what kind of policy you have or want to purchase.
The only time you will have to worry about rate increases is when your term policy expires.
Will Inflation Increase Your Life Insurance Rates?
If you already have a life insurance policy, have no fear, your rates will not go up despite the inflation. Once your life insurance policy is issued, your rates are locked in for life, whether you have a term policy or a permanent policy. The only time you will have to worry about rate increases is when your term policy expires, and you choose to purchase a new one or renew your current policy.
Will Life Insurance Companies Experience Financial Difficulties Due to Inflation?
If you’re worried that your life insurance company will experience financial trouble during this period of inflation, which will either raise your rates or diminish your policy, you can rest easy. Inflation is generally only temporary, so it’s not likely to create hardship for insurers.
That said, it’s crucial to purchase a policy from a company with an A or higher rating from the national rating services. Avoid choosing a lesser-rated life insurance company, because although you might save some money, choosing a less stable company could end up being a problem for you down the road.
Budgeting For Life Insurance
We get it: the price of everything is astronomical these days, but that doesn’t mean you have to consider getting rid of your life insurance policy or going without one. There are things you can do to fit a policy into your budget, allowing you to still be able to provide for your family when you are gone. Things you can do to cut down on costs include:
Cutting back on gasoline usage
Shopping for your car insurance every 6 months
Paying down or paying off high-interest loans and credit cards
Cutting your spending on groceries wherever possible
Making your coffee at home rather than paying $5 – $7 at your local coffee shop
Cutting back on eating out
Times are tough, and that’s all the more reason for you to make sure you have a life insurance policy to protect your family’s financial future. After all, your family has financial obligations that will not go away when you are gone; they will need your help more than ever with their expenses, and the last thing you want them to worry about is money while they are grieving. There are many great affordable life insurance options to choose from that will provide enough money for your family, for a low monthly price.
The best way to find the right life insurance policy for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.
