Insurance as the Key Ingredient of the “New” Estate Planning

Summary of a Live Presentation by Martin M. Shenkman, J.D., CPA, MBA, PFS®, AEP (Distinguished)

Despite the American Taxpayer Relief Act of 2012 (“ATRA”), which has now made the federal estate tax exemption “permanent” at $5.25 million, your high net worth clients should still consider estate tax planning right now.  The gift exemption is still $5 million and there is a good chance this may be reduced in the future.  Plus, the combined estate (or gift) tax rate and generation-skipping transfer tax rate is now 64% (not factoring in “decoupled” states’ estate tax)!  Those clients who may have deferred planning – – by rationalizing that the estate tax might be repealed – – no longer have any excuse for putting it off.

ATRA has also shifted the focus of “new” estate planning in ways that favor life insurance.  Given the higher exemption, there may be less interest in sophisticated and complex estate tax planning techniques (GRATs, sales to IDGTs, etc.) and a renewed interest in the simpler alternative of a life insurance policy held in an irrevocable trust (“ILIT”).  Plus, more attention will be placed on reducing the effect of ATRA’s income tax increases.  Clients may prefer to keep rather than gift appreciating capital gains assets, like real estate and stocks, so they can obtain a step-up in basis at death – – and instead gift cash into life insurance policies that mature income tax-free.  Even clients with no estate tax concerns may want to take advantage of life insurance’s many lifetime and testamentary income tax benefits.

Here are just a few life insurance techniques I see as great planning opportunities after ATRA:

(1)  Use of cash value build-up and policy loans to avoid the new higher income tax rates and the Medicare net investment income “surtax”.

(2)  Private placement life insurance and private placement variable annuities for use by ultra-high net worth clients both for income and estate tax reasons.

(3)  Corporate split-dollar loans to employees, at low interest rates, to pay for life insurance on an income tax-advantaged basis.

(4)  Life insurance in an ILIT so a business or real estate can remain in the taxable estate and get a capital gains basis step-up, while any estate tax can be paid by the insurance.

(5)  Life insurance as a retirement planning vehicle, particularly for younger generations without plans at work.

(6)  Use of the Multi-Purpose Irrevocable Life Insurance Trust (“MILIT”) to hold a policy and achieve many diverse goals other than paying estate taxes.

To learn more about these life insurance techniques, as well as others that are now hot in the new estate planning environment of 2013 and beyond, please download a complimentary copy of Mr. Shenkman’s complete presentation entitled “Life Insurance Planning Post-ATRA” courtesy of








Marty-Shenkman38403840Martin “Marty” Shenkman, Esq., CPA, MBA is an estate planning attorney and Certified Public Accountant from Paramus, New Jersey. He received his Bachelor of Science degree from Wharton School, University of Pennsylvania 1977 with a concentration in accounting and economics. He received a Master’s degree in Business Administration from the University of Michigan 1981, with a concentration in tax and finance.  Mr. Shenkman is a widely quoted expert on tax matters and is a regular source for numerous financial and business publications.  Mr. Shenkman has a free e-mail newsletter and presents a number of educational webinars for the estate planning community.  Visit his website at to sign up for his e-mail newsletter and get access to a number of excellent materials for estate planners of all designations.


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