Irrevocable Trusts

Irrevocable Trusts

  • November 1, 2023

Story Description

Protecting clients’ estate by restructuring the ownership of their assets

As responsible advisors to our clients, we should never underestimate the importance of adequately arranged ownership of their assets, including life insurance. Choosing an ill-suited insurance instrument can put unnecessary pressure on the clients’ estate, resulting in significant financial stress, and even fire sales of their assets.


A prosperous real estate investor and his wife owned 15- and 20-year term life insurance policies completely exposed to estate taxation. Their continued and unplanned success showed a projection of a shocking amount of estate tax due nine months after the second death. The problem was aggravated by a lack of liquidity in their estate, which is typical for the real estate investment industry.


Upon our analysis in close collaboration with the client’s estate planning lawyer, we developed a strategy that allowed us to reduce the “estate tax value” without decreasing the actual value of their assets. Following the new approach, we created entities outside the estate for new projects where all future appreciation will occur. We also converted the term policies to permanent. This conversion required larger premium deposits but provided the appropriate permanent protection for the family. According to the new strategy, the client sold the insurance to a newly created irrevocable trust benefiting the surviving spouse and descendants.


Thanks to the well-executed multifaceted plan, our team provided financial comfort to the client by removing the life insurance policies from estate taxation, allowing them to use the funds during their life if needed, and substantially decreasing the risks of financial stress for their descendants.