• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
C. Douglas Welty PLC

C. Douglas Welty PLC

Estate Planning - Trusts - Wealth Preservation - Business Law

  • Home
  • Estates & Trusts
    • Living Trusts
    • Protecting Your Surviving Spouse, Children, and Grandchildren
    • Estate Taxes – They’re Not Dead Yet
    • The Generation-Skipping Transfer Tax (GSTT) – An Introduction
    • Naming Guardians and Trustees for Your Minor Children
    • Income Tax-Saving Community Property Trusts for Virginia Couples
    • Wealth Preservation Strategies and “Asset Protection” Trusts
    • Virginia Probate – An Overview
  • Related Practice Areas
    • Wealth Preservation Strategies and “Asset Protection” Trusts
    • Business Law and Planning
    • Free Speech and Religious Freedom
  • About
    • Board Certification
    • Inspiration
    • C. Douglas Welty
    • Anita Blair
  • News & Updates
  • Contact
Home » Consider “Front-Loading” Your Life Insurance Trust Contributions

Consider “Front-Loading” Your Life Insurance Trust Contributions

December 7, 2012 By Doug Welty

A proposal that first appeared in the Obama administration’s failed 2012 budget proposal sought to override existing state laws and limit the terms of cascading or “dynasty” trusts to 90 years. This proposal didn’t make it into law, but might resurface again in a future Democratic administration or congress.

Frontload your irrecovable life insurance trustAlthough there can be no guarantees, any new federal law along those lines probably would treat existing dynasty trusts as grandfathered, and so exempt from this term limitation. However, if gifts were made to such trusts after the effective date of a trust term limitation law, a result might be that the trust would lose its grandfathered status. This already happens with certain grandfathered trusts (those settled before September 25, 1985) with respect to the generation-skipping transfer (GST) tax.

Or, a contribution after the effective date might cause the trust to be divided into a “dynasty share” and a “limited-term share.”

Many of my clients (and many, many people who aren’t my clients yet) with potentially taxable estates have already-existing irrevocable life insurance trusts (ILITs) to which they contribute annually. Many of these trusts are 100% exempt from the generation-skipping transfer tax. Those folks, to the extent possible and practicable, should consider using some of their lifetime exemption to “front-loading” their gifts to such GST exempt ILITs. Just in case.

Filed Under: Estate Taxes, For Advisors, Gift Planning, Gift Taxes, Life Insurance, Trusts, Wealth Preservation

Primary Sidebar

May I help you?

Request an appointment, or ask Doug a quick question:
  • This field is for validation purposes and should be left unchanged.

C. Douglas Welty PLC · 2111 Wilson Boulevard - Suite 800 · Arlington, Virginia 22201 · 703-276-0114

  • News & Updates