The US National Debt, High Taxes, and Looming Recession Make the Irrevocable Insurance Life Trust (ILIT) an Essential Retirement and Estate Planning Tool
—Michael Pento
BOULDER, CO, USA, November 20, 2022 /EINPresswire.com/ — For U.S. taxpayers, an irrevocable life insurance trust (ILIT) is arguably the most effective structure to incorporate risk-free wealth building (no exposure to stock market losses), tax-free growth tax, tax-free income, death benefit, tax-free generational wealth transfer and wealth protection. An ILIT consists of two main parts: (1) an irrevocable trust; and (2) a life insurance policy held in the trust. An ILIT makes economic sense even for moderately wealthy people, especially in today’s uncertain and volatile economy.
Rising public debt and risky stock market
The US national debt is currently $31 trillion and above, and the federal government’s unfunded liabilities are estimated to be around $100 trillion. Income tax rates are currently at historic lows, but will predictably rise to fund public debt. The inheritance tax rate is currently “only” 40%. Granted, each individual currently enjoys a lifetime gift and estate tax exemption of over $12 million, but this is expected to drop to over $6 million in 2026. Most people’s savings are held as “qualified money” in IRA or 401k-type accounts, where it can grow tax-deferred, but the money will be fully taxed as income when distributed. When people transfer their wealth to the next generation, it is often mismanaged, wasted or lost to the children’s ex-spouses. Frivolous litigation is a constant risk to personal wealth and family businesses. And when a large estate is bequeathed to the next generation, it is subject to inheritance tax.
The US stock market is overvalued and heading for a important fix. “Right now the market is going lower – it could be 30%, 50%, it could be 60%, 70%…until we get a real pivot and/or we get a rate of ‘inflation below 4%,’ warns fund manager Michael Pento.
So the problem includes a volatile stock market, high public debt, high taxes, and the risks of mismanaged wealth and litigation.
Solution: Irrevocable Life Insurance Trust, ILIT
— Growth excluding taxes
— Tax-exempt income
— Tax-free death benefit
— No inheritance tax or GST, forever
— Risk-free growth, no stock market losses (capital protected, 0% floor)
— Benefit you, your spouse and your descendants (according to your instructions)
— Preserve/continue family values, traditions, businesses
— Protecting family assets (taxes, divorce, lawsuits, frivolity)
— Provide financial security for you and your family
An index-linked universal life (ULI) policy can provide good investment returns while virtually eliminating market risk. Variable life insurance offers the possibility of higher market returns, but with the risk of market downside.
The ILIT is managed by one or more trustees for the benefit of the beneficiaries of the trust. At the discretion of a trustee, the trustee may make tax-free distributions to the beneficiaries of the trust (including the settlor of the trust (settlor)) through tax-free insurance policy loans. This is essentially non-taxable income for the beneficiaries and the ILIT does not need to repay the policy loans. Instead, the loans are repaid from the death benefit upon the death of the insured. The balance of the death benefit (life insurance proceeds) is then paid to the ILIT free of income and inheritance taxes.
Depending on how a trust is designed, some of the capital of the trust can be invested in a new life insurance policy each generation to repeat the cycle, potentially for many generations.
Initial installation costs are usually between $5,000 and $20,000. Annual monitoring and maintenance costs for an ILIT are in the range of $500 to $1500.
Thomas Swenson, J.D.
Law Office of Thomas J Swenson
+1 303-440-7800
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