two responsible adult children are the primary heirs, the most direct method is to make them owners of the policy or policies. Annual gifts within the gift tax exclusion amount ($19,000* per recipient, or $38,000 if a husband and wife join in the gift) can be made to cover the owners’ premium costs. *2025 Gifting Exemption For multiple heirs, an irrevocable life insurance wealth replacement trust may be the preferred policy, typically with a bank trust department or trust institution as trustee. An individual may also be the trustee. By giving beneficiaries of the policy the temporary right to draw out any contributions to the trust (“Crummey powers”), the gifts for their benefit are considered present interests that qualify for the annual gift tax exclusion. Trusts have the additional benefit of individual ownership of asset protection (i.e., protection from creditors). Wealthy families with high incomes may wish to offset major charitable distributions at death. Transfers to the trust to cover the insurance costs can be sheltered from gift tax by lifetime use of unified estate and gift tax credits. The maximum amount is $19,000 per person. This means a person can give away $19,000 to any person for any reason without having to worry about gift tax possibilities. A married couple can give double this amount, or $38,000. For example, a married couple who has three children, all married, and they have five grandchildren could give away to their family without any gift tax a total of $418,000. A well-designed Wealth Replacement Trust using a well-designed, high- grade, dividend-paying life insurance can prevent the loss of wealth transfers to outside predators and unwanted relatives. For more information, call the financial professional who gave you this book. Other Issues to Think About: You need to consider having your attorney prepare a Durable Power of Attorney to cover your bases when it comes to making healthcare decisions. He should also prepare a Legal Conservator for allowing someone to act as your attorney-in-fact for making financial decisions.
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