Life Insurance For Blended Families

 You may be part of a “blended family” because you’ve remarried. Blended families may include children who are far apart in age, with some requiring provisions for their continued care and education, while others are grown and self-sufficient. If certain trust assets are earmarked for some children, life insurance within the trust can be used to provide a specific, equalized amount for other children, while minimizing taxes. 

Special Needs Trust

 A properly structured special needs trust with life insurance offers unique benefits. It can help you maximize the assets devoted to this goal without impacting other goals, including funding your own retirement or providing for other heirs. After your death, the life insurance proceeds will be used by the trustee to make distributions to support the special needs individual.

Dynasty Trust 

A dynasty trust is an irrevocable trust that serves as a resource to provide income and support to children, grandchildren and future generations. With the assistance of an estate planning attorney, you can establish a dynasty trust in combination with life insurance. The assets held in the trust in the form of life insurance are protected from future federal gift and death taxes. 

Incentive Trust 

When it is important to you to influence the use of assets you leave to heirs, an incentive trust can allow for certain conditions to be imposed upon beneficiaries. With this trust vehicle, you can specify how funds can be dispersed , or any other legally permissible requirement you, as grantor, might wish to impose. Combining an incentive trust with life insurance may serve to minimize the effects of taxes.

Grantor Retained Annuity Trust (GRAT)

 The GRAT can help you minimize taxes and leave more to heirs by removing future appreciation from your taxable estate from assets such as commercial real estate or a successful business. As grantor, you transfer specific assets into the trust, retaining the right to receive an annual payment from the gifted assets for a certain number of years. As long as you outlive the GRAT, when it terminates, any property remaining in the trust passes to the remainder beneficiaries without any additional gift or estate tax consequences. Individuals using GRATs often pair the GRAT with a life insurance policy held in an irrevocable trust that will provide funds to offset any estate taxes that might be triggered if the assets are brought back into the grantor’s taxable estate as a result of an untimely death.