The hinge around which estate planning revolves is gifting. The future growth in value of the asset from the date of gift to
the date of death will be removed from the estate for estate tax purposes. In a 45% combined
federal and state estate tax bracket, this transfer can result in large estate tax savings over a
period of time. This concept works very well
with life insurance, where the death benefit is
actuarially leveraged, income tax free and estate tax free, if owned by an irrevocable trust.
But what can be recommended to an estate
owner who is uninsurable or medically rated for
life insurance so as to make the internal rate of
return on the death benefit uneconomical from a
financial point of view? Or what about an estate
owner who has already purchased life insurance
owned by an irrevocable trust to offset estate
taxes? Can we still achieve a measure of estate
tax savings within the framework of another
non-leveraged financial asset?
The answer is yes, as long as the client lives a
reasonable number of years from the date of gift to
the date of death. Non-qualified deferred annuities
owned by an irrevocable trust can provide income
tax-deferred growth and estate tax-free growth to
