Mini Case Study: Irrevocable Life Insurance Trusts
This week, we helped a new family office client in Danville, CA automate their annual gifting program to their adult children. Here’s what that looked like:
Jane and Tom have 3 children and 5 grandchildren, and have been utilizing their annual exclusion gifting allowance for years. In fact, they’ve been leveraging those gifts by having them go into an irrevocable life insurance trust (ILIT). The trustee can then use those ILIT funds to pay for the insurance premiums on a large “2nd to die” life insurance policy on Jane & Tom’s lives.
However, the process has been a bit cumbersome and creates an administrative burden for everyone each year, especially around the Holidays when the premiums are due.
As part of our family office suite of services, we’ve now automated this entire process. Here’s how:
Established a brokerage account at Charles Schwab in the name of the irrevocable trust (they were using a local bank account)
Electronically linked their Schwab revocable trust account with their Schwab irrevocable trust so that gifting can be made via electronic fund transfers, instead of by writing checks
Crummey letters are automatically generated each year and sent out via Docusign to the beneficiaries
Life insurance premiums are pulled from the Schwab irrevocable trust account annually
Where we once had $19K annual checks, administered manually and with a bit of heartache, we now have a seamless process where annual exclusion gifts are securing a $5M triple tax-free life insurance policy (income tax free, gift tax free, and estate tax free). This is exactly the kind of real wealth management that our family office clients have come to expect.
Send me an email (rob@swrpteam.com) or book a time on my calendar (https://calendly.com/rob_summit-wealth-calendar) if you’re dealing with a similar situation and need a trusted Advisor that can help.
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