Estate Taxes – Will They Affect Me?
The following is an example of the possible estate tax liability under current law for a person dying in 2013:
|Size of Estate||2013|
The calculations assume the decendent used his/her entire $5,250,000 estate tax exemption amount at death.
How will you pay the transfer costs?
The federal estate tax is generally nine months after your death. Even using basic estate planning tools, you should be able to reduce your taxable estate. Nevertheless, if you have a large net worth, it is likely that your estate will be subject to the federal estate tax.
Your estate could pay the resulting federal estate tax by doing any of the following:
- Using cash
- Borrowing funds
- Liquidating assets, or
- Life insurance death benefit proceeds
|Cash||Simple||Few estates have enough cash and/or liquid assets|
|Borrowing||Prevents possible “fire sale” of assets||Defers and compounds the liquidity problem since loans must be repaid with interest|
|Liquidating||Prevents payments over time with associated costs||May be forced to have a “fire sale” of assets
May cause the sale of a closely-held family business
|Life insurance held by an irrevocable life insurance trust (ILIT)
||Prevents possible “fire sale” of assets
If properly structured and funded, life insurance death benefit proceeds should pass to heirs free from income1 and estate2 taxes
Terms of an ILIT are irrevocable and cannot be changed
Cost of life insurance premiums may incur expenses in establishing and maintaining an ILIT
Adding Life Insurance to Your Estate Plan
Pacific Life Insurance Company's single life and second-to-die universal life insurance products may help you provide sufficient liquidity for your estate plans.
Ask your life insurance producer which Pacific Life insurance product will fit for you. To get ideas on how others have used life insurance in their estate plans, visit our Life Insurance and Estate Planning page.