Ilit

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skbroker's picture
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Joined: 2007-06-16

So I have a client with a large net worth and concerned about paying large estate tax after passing. They have one daughter who is the sole bene. He is talking to a estate planning attorney who specializes in ilit and have recommended j hanc*** based on low premium. They both have gone through the physical and j hanc premium will 36k for every mil. Since we are talking about a 6mil tax payment he'll need to pay about 200k a year to be covered for 6 mil. The clients are in their early 80's and would not consider them in great health so the question is why would j hanc*** cover them knowing that they'll lose money. I mean most likely these clients will live for another 10 years which means that the premium they'll receive will be much lower than the death benefit Paid out

anonymous's picture
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Joined: 2005-09-29

The premiums will always be much lower than the death benefit.  Also, people cancel policies so not every policy will result in a death claim.   The policies are typically structured so that the death benefit will equal appproximately a 6% return at death.
 
That would mean that this couple either has a life expectancy of 16 years, or something isn't quite accurate with the facts as they are presented. 
 
How is the client funding this policy in terms of estate and gift taxes?  What I mean is that the premiums will ultimately be taxable.  Have they used any of their gifts?  They should use up their gifts while alive instead of waiting for death.

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