Living Will In Florida
After you die, all the assets you owned in your individual name at the time of your death will be listed on your Federal Estate Tax Return. If the value of your estate is higher than the estate tax threshold for that year, an estate tax will be owed. In 2011, the estate tax threshold will be $1 million and the estate tax will be a whopping 55 (fifty-five) percent. Estate taxes must be paid in cash within nine (9) months of death. For every dollar you pass over the first million, your estate will be taxed 55 cents. A million dollars may sound like a large amount of money but it is really quite small when you consider that it includes life insurance proceeds, the value of your home, stocks, bank accounts, retirement accounts, jewelry, paintings, and anything else that you may have had titled in your name at the time you died.
One approach to providing ready cash to pay these taxes and other expenses is through life insurance proceeds. The proceeds may be paid to the Federal government instead of your heirs having to liquidate assets in order to pay the estate tax bill. Life insurance provides an income tax free death benefit but the value of the benefit is added to the total of assets in the estate if not structured properly. This creates a never-ending cycle of taxes and insurance policies. The way to avoid this result, limit or eliminate your estate tax, and provide tax free money to your beneficiaries is to hold the life insurance policies in an Irrevocable Life Insurance Trust, or ILIT.
An ILIT combines the protection a trust with the liquidity of life insurance benefits. Using the $13,000 per year gift tax exclusion, you can gift assets to the ILIT annually to cover the insurance premiums with no tax consequence. At your death, the proceeds are transferred to your heirs free of all income tax and all estate tax. This will provide the necessary liquidity your heirs will need to pay your funeral costs, estate taxes, probate fees and settlement costs.
Upon your death, the trustee of the ILIT will make appropriate distributions of cash proceeds to cover debts, taxes, and funeral expenses. The trustee could even purchase some or all of your business with the cash proceeds and professionally run the business until your children were old enough to take over. The trustee could also make appropriate loans to the spouse, children, and business.
An ILIT provides flexibility and tax advantages. For more information on ILITs and to determine if they are the right vehicle for you, please contact your South Florida estate planning attorney.
For more information on successful Florida estate planning and asset protection techniques, please contact the South Florida law firm of Wild Felice & Pardo, P.A. at 954-944-2855 or via email at info@wfplaw.com to schedule your free consultation. Let us protect what you value most.
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