Transcript Estate Planning Using Life Insurance

Estate Planning Using Life Insurance
Presented by
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July 2013
VLCM-OC-239A
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Circular 230 Disclosure
This material is not intended to be used, nor can it be used
by any taxpayer, for the purpose of avoiding U.S. federal,
state or local tax penalties. This material is written to
support the promotion or marketing of the transaction(s) or
matter(s) addressed by this material. Pacific Life, its
distributors and their respective representatives do not
provide tax, accounting or legal advice. Any taxpayer
should seek advice based on the taxpayer's particular
circumstances from an independent tax advisor.
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Pacific Life Insurance Company
Newport Beach, CA
(800) 800-7681 • www.PacificLife.com
Pacific Life & Annuity Company
Newport Beach, CA
(888) 595-6996 • www.PacificLife.com
Please Note: This presentation is designed to provide introductory information in regard to the subject matter covered.
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance
products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity
Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial
obligations accruing under the products it issues. Insurance products and their guarantees, including optional benefits and any
fixed subaccount crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company,
but they do not protect the value of the variable investment options. Look to the strength of the life insurance company with regard
to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency or their affiliates from
which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding
the claims-paying ability of the life insurance company. Variable insurance products are distributed by Pacific Select Distributors,
Inc., (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company, and an affiliate of Pacific Life & Annuity Company,
and are available through licensed third-party broker-dealers.
Consult your attorney or tax advisor for complete up-to-date information concerning federal and state tax laws in this area.
Investment and Insurance Products: Not a Deposit – Not FDIC Insured –
Not Insured by any Federal Government Agency – No Bank Guarantee – May Lose Value
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You Want to Leave Your Estate
to Your Family,
However…
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A Substantial Portion of Your Large Estate May
Pass to the Government to Pay Estate Taxes*
* According to the American Taxpayer Relief Act of 2012, the federal estate, gift and generation skipping transfer (GST) tax exemption amounts
are all $5,000,000 (indexed for inflation effective for tax years after 2011); the maximum estate, gift and GST tax rates are 40%. As of
January 1, 2013, the annual gift tax exclusion is $14,000 per donee (indexed for inflation).
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Estate Planning Exemption Amount
Federal Estate, Gift & Generation Skipping Transfer Tax Exemption Amounts*:
Year
Exemption
Credit
Highest Tax
2013
$5,250,000
$2,045,800
40%
* According to the American Taxpayer Relief Act of 2012, the federal estate, gift and generation skipping transfer (GST) tax exemption amounts
are all $5,000,000 (indexed for inflation effective for tax years after 2011); the maximum estate, gift and GST tax rates are 40%. As of
January 1, 2013, the annual gift tax exclusion is $14,000 per donee (indexed for inflation).
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With Planning…
You Can Meet Your Estate Planning Objectives
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The Strategy
Select proper
tools & techniques
Provide estate
liquidity when
needed
Establish irrevocable
life insurance
trust (ILIT)
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How Estate Planning Works
Typical Plan
• Take advantage of the amount exempt from federal estate taxes
• Use unlimited marital deduction to transfer remaining estate to survivor
without federal estate tax at first spouse’s death
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Estate Planning Using Life Insurance
with an Irrevocable Life Insurance Trust (ILIT)
• Removes life insurance death benefit proceeds from taxable estate
• Preserves bulk of estate and provides support for your heirs
• Provides executor with liquid funds to pay estate taxes and other
settlement costs
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How Estate Planning Works
ILIT
• ILIT-owned life insurance to remove policy proceeds from taxable estate at
the death(s) of the insured(s)
• If properly structured, life insurance policy proceeds are paid to ILIT
income* and estate tax-free,** providing estate liquidity
* For federal income tax purposes, life insurance death
benefits generally pay income tax-free to beneficiaries
pursuant to IRC Sec. 101(a)(1). In certain situations,
however, life insurance death benefits may be partially
or wholly taxable. Situations include, but are not limited
to: the transfer of a life insurance policy for valuable
consideration unless the transfer qualifies for an
exception under IRC Sec. 101(a)(2) (i.e., the “transferfor-value rule”); arrangements that lack an insurable
interest based on state law; and an employer-owned
policy unless the policy qualifies for an exception under
IRC Sec. 101(j).
** According to the American Taxpayer Relief Act of
2012, the federal estate, gift and generation skipping
transfer (GST) tax exemption amounts are all
$5,000,000 (indexed for inflation effective for tax years
after 2011); the maximum estate, gift and GST tax
rates are 40%. As of January 1, 2013, the annual gift
tax exclusion is $14,000 per donee (indexed for
inflation).
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The ILIT
Irrevocable Life
Insurance Trust
Life Insurance Policy
Grantors/Insureds
Executor
Heirs
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For You…
• Removes life insurance death benefit proceeds from taxable estate
• Provides support for heirs after your death
• Preserves bulk of your estate for your heirs
• Provides executor with liquid funds
to pay estate taxes and other
settlement costs
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For Heirs…
• Receive any remaining ILIT assets
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Consider Estate Planning if You…
• Desire to designate the beneficiaries of your estate
• Want to maximize the wealth passing to your heirs
• Are concerned about having a taxable estate
• Life insurance owned by an ILIT if your want to pass estate tax-free* death
benefit to your heirs
* According to the American Taxpayer Relief Act of 2012, the federal estate, gift and generation skipping transfer (GST) tax exemption
amounts are all $5,000,000 (indexed for inflation effective for tax years after 2011); the maximum estate, gift and GST tax rates are
40%. As of January 1, 2013, the annual gift tax exclusion is $14,000 per donee (indexed for inflation).
VLCM-OC-239A
PT-40181-02
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