When executing an Estate Plan, how does one provide for the subsequent, peaceful transfer of equal shares of their assets to their heirs? One of the most efficient, and user freindly tools available to Executors is a “BOLIP”! That stands for “Big Ol’ Life Insurance Policy!” Let’s say the family business is run by one, or several of the children of the founder, how can you allocate their continued ownership and square that with an equal amount to those children not involved, or having no interest in maintaining the family business? Use a “BOLIP” to fund their share of the businesses value in the total inheritance so that they get an equal amount, and the current involved children maintain their interest in, and control of, the family business.
This would work the same for a family summer home, where not all the children can afford to, or even want to be involved with the ongong ownership, maintenance and expense of the property. A “BOLIP” can be used to augment the value in the house that the disinterested children would be aloocated in an evenly devided estate, while the interested children keep their ownerhsip of the family home, in their family.
Another useful strategy for “BOLIP’s is to offset Estate Taxes. How can one shield their Estate from the maximum 55% estate tax due on those values exceeding the $5 million dollar exemption? Lets say you have a $10 Million dollar estate, of which $5 Million is going to be subject to that tax? Buy a $2.75 Million dollar “BOLIP” on the Prinicple, so that when they pass, the life insurance pays the beneficiaries the amount they need to pay the taxes on the total estate. The ownership of the Policy must be held in an Irrevocable Life Insurance Trust (ILIT) to keep it seperate and apart from the Estate, and thus not also part of the taxable Estate amount.
Life Insurance pays a benefit that is many times greater than the cost of that benefit, and is backed by the full faith and credit of each Life Insurance company. Most major Life Insurance companies are all highly rated for their financial soundness and stability, and thus, the risk that this benefit will not be paid by them is miniscule. And, some carriers have adopted a strategy that entails a “premium deposit fund”, which allows the policy purchaser the ability to ‘fire and forget’ this element of their estate plan. This “premium deposit fund” is a seperate account that is linked to the Policy, from which the premium is drawn on a regular basis. Thus the policy wil not require any maintenance and attention, and any remnant in the premium deposit fund will also revert to the beneficiaries. You need to buy a permanent policy for this to work as Term policies end, and then the cost of insurance and/or health issues may make the buyer uninsurable.
For information contact us on our website: http://www.farmersagent.com/ctrowbridge
