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As humans, we are all capable of making mistakes.

That’s why golf has mulligans, computers have delete buttons, and last-minute Christmas gifts come with receipts—or at least they should.

Me, unwrapping my gift: “Oh, a Chia Snuggie. Thanks. I’ll cherish this from now until I reach the front of the return aisle at Target.”

This is also one of the reasons why the majority of trusts are revocable.
With a revocable trust, you have the best of both worlds:

  1. An estate plan uniquely tailored to your specific goals and objectives, and
  2. The ability to changes provisions if your goals and objectives change.

Father-in-Law: “Our daughter married a wonderful man.  That’s why I want our entire family business to be run by him.  He has a good head on his shoulders.”

Father-in-Law, two years later: “Our daughter married an idiot.  I don’t want him in control of anything from my trust unless there’s no one and nothing left on the planet smarter than him.  And for reference, on a scale from 1 to 10, I’d rate his intelligence as ‘irregular paramecium.’”

So there are clearly advantages to having a revocable trust.

But irrevocable trusts have one perk over their fair-weather brethren:
The ability to hold property in a manner that is not estate taxable.

With the current estate tax exemption (amount you can pass at death without having to pay estate taxes) being $5 million, let’s say that you have an estate of $6 million with $2 million being death benefits from life insurance policies on your life.

If you pass away, the first $5 million of your estate will pass estate tax free thanks to the exemption; however, that last million will be taxed at a rate of 35%.  This means that the United States government will receive a windfall to the tune of $350,000 from your estate.

But let’s say—hypothetically—that you’d rather have all your money go to your loved ones. (I know, I know.  It may sound crazy, but go with me on this one.)

One way to accomplish this is to create an ILIT, or an “irrevocable life insurance trust,” and transfer your life insurance policy to that trust. Since you don’t have any control over the ILIT (hence the irrevocability) and you lose all incidents of ownership over your life insurance policy in the transfer, the life insurance policy will no longer be considered part of your estate for estate tax purposes.

In short, through proper utilization of an irrevocable life insurance trust, your loves ones receive $6 million rather than $5,650,000.

Like I said before, as humans, we are all capable of making mistakes. However, meeting with an estate planning attorney is the easiest way to avoid the kinds of mistakes that deprive your loved ones of sizable chunks of your hard-earned money and property.

To learn more about the benefits of irrevocable trusts, contact Drew Rogers at 501-221-7776 or email him at