The Tax-Free Inheritance Trust can be one of the most powerful strategies used to preserve your wealth under today's tax code.

It is one of the preferred choices of wealthy estate owners and it's usually funded with Survivorship Life Insurance.

Preserve Your Wealth

Most of us would like our entire estate to pass to our children, grandchildren and other heirs, but anyone with an estate currently valued over the current federal exemptions will have trouble doing so without careful, advanced planning.

Estate owners can face up to 40% or more in estate confiscation due to the imposition of our current federal estate tax system.

The reason for this is simply based on the fact that statistics show estate owners spend less than 3 hours planning for estate succession. Contrast that to the 85,000+ hours we spend in accumulating it.


If properly funded, the Irrevocable, Tax Free Inheritance Trust can potentially play the most important role in your estate preservation plans and here's why:

The Irrevocable Trust is basically three trusts in one, it's a:

  • Tax-free Inheritance Trust;

  • Generation Skipping Trust; and

  • Wealth Replacement Trust.

Easy, simple, time tested, and completely legal under the current tax code.

Life insurance is the most commonly used tool inside an Irrevocable Trust as it can serve to offset or "discount" estate taxes, or to create an estate when such an estate may not exist.

Let's Look at an Example

Mr. & Mrs. Estate Owner have a $15 million estate. Under current law, if they passed away today, estate taxes will consume about $2 million.

To offset this inevitable confiscation, Mr. & Mrs. Estate Owner establish an Irrevocable Trust and make an annual gift of $30,000 into it ($15,000 each). The trustees (which are typically the children) elect to use these monies to purchase a Survivorship Life insurance on their parent's lives.

At the second spouse's death, $2 million is paid out 100% income and estate tax-free to the trust. The children (as trustees) then have the option of using these monies to pay off the $2 million in estate taxes at a steep discount.

The net result is that 100% of the estate is preserved and distributed to their children. The economic advantage is that it only required Mr. & Mrs. Estate Owner to transfer less than 1% per year of their total net worth to fund the policy over a 10 year period, based on current assumptions.

Diffusing the Ticking Time Bomb

It's also worth noting that IRA assets can be taxed proportionately higher than any other asset you own. These assets can be taxed up to 70% at death due to the imposition of both federal estate and income taxes.

In our previous example, if Mr. & Mrs. Estate Owner had a $1 million IRA, this could be reduced down to less than $300,000 at death.

The Irrevocable Trust (when properly funded) 'diffuses' this financial time bomb by replacing these assets 100% income and estate tax free for potentially pennies on the dollar.

Immediate, Guaranteed Leverage

Most importantly, the Irrevocable Insurance Trust provides immediate guaranteed leverage to ensure that no matter how long you or your spouse live, there will always be a sufficient amount of liquid assets -- income & estate tax free -- to preserve the total estate value.

Most Professionals agree, it can be the CORNERSTONE of all estate plans.

When properly funded and maintained, it will allow you to:

  • Transfer assets 100% income & estate tax-free to the heirs;
  • Reduce or eliminate estate tax costs by 90% or more;
  • Replace tax-qualified (IRA) assets, which are taxed up to 70% at death;
  • Provide creditor and divorce proof funds for children and grandchildren;
  • Avoid the 55% Generation Skipping Transfer Tax when leaving assets directly to grandchildren.

Survivorship Life - The Key Funding Tool

Survivorship life comes in two basic varieties: Variable Yield and Fixed Yield Plans. Variable plans allow the trustee/owner to invest the premium deposits into various investment options or sub account portfolios. Such options may include domestic or international stocks, bonds, real estate, natural resources and gold, managed accounts and more.

Fixed plans which are usually of the whole life or universal life variety will guarantee an annual yield for the life of the policy. Although they are generally considered fairly inflexible, they do provide cost-effective solutions.

Variable Yield Plans are considered to be a more growth-oriented insurance policy as it allows the trustees to direct the assets among a wide array of various portfolios.

This type of approach can potentially increase the cash value build up at a faster rate than its Fixed Yield counterpart. The potential value lies in higher returns, which may result in fewer total premiums by the estate owner or trustee.

However, there is no minimum guarantee return in a variable plan and adverse performance may require additional premiums than its Fixed Yield counterpart.

Both types of plans have certain advantages and disadvantages. It largely depends on your personal situation, suitability, risk tolerance, and time horizon.

Can I Transfer My Current Insurance Policies To An Irrevocable Trust?

Yes, but you must give this issue some careful consideration.

Whenever you transfer the ownership of an existing insurance policy currently held in your name, your wife's name or that of your Living Trust, the IRS imposes a mandatory "three-year-in-contemplation-of-death" rule.

This basically means that if you die before the beginning of the fourth year (after you've made the gift) the IRS will include the death benefit in the final evaluation of your estate. This could zap 50% or more of the value!

It may be to your advantage to loan or surrender the cash value of existing policies especially if they are single life plans to fund your new Survivorship Plan. Not only will you likely gain 2-5 times the leverage, but also you'll avoid the three-year throw back rule.

Again, there are many considerations one should think about before implementing a strategy including tax consequences, surrender charges or potential lapses in coverage.

Survivorship Life Insurance MUST be shopped for Very Carefully

Whether it's a Fixed or Variable Yield-type plan, only a few of the top one hundred life insurance companies currently offering second-to-die plans meet our criteria for suitability and recommendation.

Get a Survivorship Life Quotes this HERE

Work with the Professionals

As an independent, professional financial firm that has specialized in this area for over 27+ years, we offer competitive Fixed and Variable Yield-type plans which meet our due diligence requirements.

These companies will have met the highest ratings standards by one of a combination of the independent rating services and will have exhibited a great deal of fairness and quality service to their existing contract holders.

Action To Take

Click HERE to obtain Irrevocable Insurance Trust information

For Faster Service Call 1-800-480-7526







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Copyright 1998 Fielder Financial Management, LTD.
All Rights Reserved.

Securities and investment advisory services offered through Fortune Financial Services, Inc. member FINRA, SIPC.
Fielder Financial Management, Ltd. not affiliated with Fortune Financial Services, Inc.  Mark Fielder, Financial Professional, CA. Insurance Lic. # 0690576.

Disclosure:  For more complete information about variable life, including charges and expenses, obtain a prospectus by calling 1-800-480-7526. Read it carefully before you invest or send money. Investment return and principal value of an investment will fluctuate.  An investor's units, when redeemed, may be worth more or less than their original investment.  Consult your tax advisor.