AboutWillard R. Brumbaugh, LUTCF, CSFP Expertise I can handle questions concerning life insurance, it`s tax implications, how to determine what is appropriate, and how it fits in one`s estate and retirement planning.
Experience For 2 1/2 years I was an expert on AskMe.com, where for most of that time I was ranked #1. I have been a moderator (instructor) for the Life Underwriters Training Council. I have been licensed since 1969.
Organizations I belong to: National Association of Insurance and Financial Advisors - California
and the Inland Empire Estate Planning Council.
I hold the professional designation of Life Underwriters Training Council Fellow.
Question how can i get the cash value from 2 existing second to die policies into a new second to die policy, which is owned by a new ILIT, without transfer for value or loss of tax exclusion ramifications?
Answer Dear Brian,
If I understand your question, you want to remove your current life insurance from a Federal Estate Tax problem by exchanging it for insurance owned by an irrevocable life insurance trust. This you cannot do, since you are attempting to change the ownership of the policy. When doing a 1035 exchange the insureds and the owners must be the same before and after the transaction. You could simply have the ILIT apply for new insurance on the insureds, and change the old policies to reduced paid up status. Or simply cash them out.
On the other hand, an ILIT can acquire a life insurance policy that is already in force. However, should the insured die during the look back period, the policy would revert to being part of the estate of the insured (assuming the insured was the owner).
