This gifting strategy can provide estate tax benefits without giving up access to policy cash value, if needed in the future.
You’ve decided to make a gift out of your estate to your heirs, but you are on the fence with completing the process. What if you need those funds in the coming years? This can be a justifiable apprehension, whether you have a little to give or a lot.
With the longer lifespans we now enjoy and the expensive healthcare costs we now face, one strategy is to use gifts to purchase life insurance as a gift for your heirs, and to do so with a trust arrangement known as a SLAT.
A SLAT, or “Spousal Lifetime Access Trust” enjoyed the spotlight in a recent WealthManagement.com article titled “SLATs and Life Insurance: Have Your Cake and Eat it Too.”
Now, knowing how to have your cake and eat it too can require a complex bit of planning. However, done right, such planning can be powerful. Problem: when life insurance is owned by an individual it ends up counting towards their estate value by virtue of such “incidents of ownership.” A Spousal Lifetime Access Trust that owns a life insurance policy (a tactic normally seen in traditional Irrevocable Life Insurance Trusts) will allow access on the part of your spouse during their lifetime while also funding the policy for your heirs. If this sounds too good to be true, then it just might be if all of the i’s and t’s are not dotted and crossed properly.
To learn more about this gifting strategy, seek appropriate counsel to ensure you know the whole process and can maintain peace of mind when it comes to giving to your loved ones.
Reference: Wealth Management.com (October 17, 2012) “SLATs and Life Insurance: Have Your Cake and Eat it Too”