Dear Harry, I’m interested in setting up a revocable life insurance trust. I’d like to know if any money given to grandchildren as a loan by the trust is taxable, since it’s not a gift. For instance, if they need $40,00 for education, a down payment on a house or to buy a car, would they be better off receiving this as a loan rather than as a trust distribution?
Dear reader, Allow me to clarify one issue before getting to your question. You talk about setting up a “revocable” life insurance trust. Most life insurance trusts are, in fact, “irrevocable” and are generally used to shelter the life insurance proceeds from estate taxation. However, since only very large estates (those over $13 million for those dying in 2023, a threshold which is slated to be cut in half for those dying in 2026 or later) are subject to federal estate taxes, such trusts are only of benefit to few individuals these days (though they can help reduce state estate taxes if you live in one of the few states with such taxes and your estate exceeds its limits, which may be significantly lower than the federal thresh …
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Dear reader, Allow me to clarify one issue before getting to your question. You talk about setting up a “revocable” life insurance trust. Most life insurance trusts are, in fact, “irrevocable” and are generally used to shelter the life insurance proceeds from estate taxation. However, since only very large estates (those over $13 million for those dying in 2023, a threshold which is slated to be cut in half for those dying in 2026 or later) are subject to federal estate taxes, such trusts are only of benefit to few individuals these days (though they can help reduce state estate taxes if you live in one of the few states with such taxes and your estate exceeds its limits, which may be significantly lower than the federal thresh …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]