2010 – Largest Estate Tax Increase in U.S. History?

The estate tax is currently scheduled to be repealed in 2010 (i.e., zero tax). However, President Obama’s new budget calls for estates valued over $3.5M ($7M for married couples) to be taxed at a rate of 45% next year and beyond. Given that these are also the current 2009 levels, the new administration argues that there is no estate tax increase. Which view do you take on this? (A) The proposed estate tax is not an increase because it mirrors 2009; or, (B) The proposed estate tax is vastly greater than the scheduled repeal of the estate tax in 2010. Some argue that this proposal signifies the largest estate tax increase in U.S. history. In all fairness, the current proposal is more favorable to consumers after 2010.

An increasingly popular estate planning tool that many people are still unaware of is premium financing for life insurance. Those that may qualify for premium financing for life insurance are individuals between the ages of 70 and 85 with a net worth of at least $1 million.

4 Key Reasons to Consider Premium Financing:

1. Estate planning
2. Philanthropic planned giving
3. Key person or business succession planning
4. Uncovering a significant hidden asset

Life insurance is known by many to be the number one means of augmenting wealth transfer from generation to generation. Many consumers are unaware that they can apply for a loan that will pay exorbitant annual life insurance premiums. The policy is an asset that serves as primary collateral for this loan that may eventually be repaid through the policy proceeds. In turn, beneficiaries may use the tax-free “death benefit” to satisfy the estate tax.

Many clients augment their current estate planning with charitable planning by donating all or a portion of their insurance proceeds to their favorite charity or alma mater. Leveraging insurable capacity (i.e., financing life insurance) is especially attractive for older key-person executives. Consumers should be aware that the amount of insurance one can apply for (insurable capacity) is typically limited to the valuation of a business, personal net worth or philanthropic involvement.

Paying life insurance premiums can cause an individual to liquidate important assets, such as their investment portfolio. Avoiding the sale of stocks or properties at a time when values are at record lows is a major incentive for astute financial advisors to recommend financed life insurance for their clients.

In today’s economic climate, many individuals over 65 are choosing to sell their existing policies due to a greater need for liquidity. Many consumers have learned that life insurance is a hidden personal asset that can be auctioned off during the client’s lifetime to the highest bidder for a discount of the face value, often referred to as a “life settlement” or “living benefit”.

The initial application process is a non-committal phase and usually takes around 30 days to see if a client qualifies. For those that qualify, it is important to carefully review risks versus rewards and to work with a specialized premium financing company that has solid references with a high level of experience and compliance within the industry.

Source by Keith Owen

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