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AALU: Avoiding 5 Common Mistakes in Life Insurance Planning

Avoiding 5 Common Mistakes in Life Insurance Planning

As estate planning involving personal life insurance becomes commoditized, so does the chance that a minor oversight will have a major tax impact. According to experts, some of the most common mistakes in life insurance planning include: (1) failure to qualify gifts to irrevocable life insurance trust (“ILITs”) for the annual gift tax exclusion; (2) improper allocation of GST tax exemption to ILIT gifts; (3) retention of incidents of ownership in an ILIT-owned policy; (4) failure to understand the planning implications of a policy classification as a modified endowment contract; and (5) triggering tax on an otherwise non-taxable policy exchange under Internal Revenue Code (“Code”) §1035.

Find out how to identify and avoid them in this whitepaper.