Cut Your Tax Bill With Permanent Life Insurance.

Cut Your Tax Bill With Permanent Life Insurance

Proper tax planning should do two things—reduce your taxes while you are alive, as well as after you die. Permanent life insurance gives you the potential to cover these two bases at once, where you can transfer your assets tax-free (income and estate) free to beneficiaries and also build up tax-deferred growth of cash inside the policy.

If income and estate taxes keep you awake at night, life insurance might be the answer. Permanent life insurance is one of the most powerful tax planning tools you can find. It offers several unique ways to address your estate tax and income tax liabilities while resolving those tax issues for pennies on the dollar. If you use this strategy, next tax season could seem like just another pleasant spring day.

Tax Considerations

Irrevocable trusts have a separate tax identification number and a very aggressive income tax schedule. However, the cash value accumulating in a life insurance policy is free from taxation as is the death benefit. So there are no tax issues with having a policy owned in an ILIT.

The Bottom Line

ILITs are a powerful tool that should be considered in many wealth management plans to help ensure that your policy is used in the best possible way to benefit your family. And even with the federal estate and gift tax exemption at $11,580,000 ($11,700,000 in 2021), it is still possible to owe state estate taxes.4? Many states begin taxing your estate at $1 million or less.