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Irrevocable Life Insurance Trusts
The Irrevocable Life Insurance Trust (“ILIT”)
is a unique instrument that serves several
important purposes, two of which we will
touch on here. Many people are unaware
that the proceeds of life insurance policies
are considered part of your estate for estate
tax purposes. By using a properly drafted
ILIT, however, you will bring the value of any
life insurance polices you might hold outside
of your estate for estate tax purposes on
both the state and federal level. For those
of you whose net worth puts them at or
near the estate tax threshold, an ILIT is a
necessary part of your estate plan.
An ILIT will also permit you to direct the
disposition of your life insurance proceeds
in a more specific manner than simply
designating a beneficiary. Frequently, our
clients have their ILIT benefit their spouse
during the spouse’s lifetime, and upon the
death of the spouse, benefit the children of
their marriage. Since an ILIT is a trust, you
can give specific directions in your trust
instrument as to how the assets should
be used, and protect the assets from your
heirs’ potential creditors.
The Executor
In New York State, any person over eighteen
years of age and of sound mind may
serve as executor of a decedent’s estate.
The executor is entitled to a statutory
commission, payable on a sliding scale. The
scale is as follows:
5% of the first $100,000.00
4% of the next $200,000.00
3% of the next $700,000.00
2.5% of the next $4,000,000.00
2% of all monies in excess of $5,000,000.00
As you can see, even a modest estate
will yield a substantial commission for the
nominated executor. Your executor will
be in charge of collecting your assets,
discharging your debts, and distributing
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your assets as per the terms of your will. As
such, the job is very important, and should
be given to someone who is responsible,
trustworthy, and meticulous in their record
keeping.
If you have been nominated as the executor
of a friend or family member’s estate, be
mindful in your duties, and keep excellent
records of all expenditures made on behalf
of the estate. By doing so, you will honor the
legacy of your loved one, assist their heirs
in their time of need, and protect yourself
from potential liability.
Estate Administration
The following documents should be
brought to your attorney after the passing
of a loved one:
An original or certified copy of a death
certificate (look for a raised seal)
1. The original will (if any)
2. A funeral bill marked “Paid”
3. A basic family tree with contact
information for close relatives
A list of assets including:
1. Real Estate
2. Bank and Brokerage Accounts
3. Vehicles
4. Retirement Accounts
5. Annuities
6. Insurance Policies
7. Valuable Collections
The above documents and information will
assist your attorney in drafting the probate
or administration petition for your loved
one’s estate. It is important to note that the
IRS form 706 - the estate tax return - must
be filed within nine months of the death
of the decedent (or within the six months
extension window if one is timely applied
for).
The probate or administration processes
are formal judicial proceedings which take
place in the decedent’s county’s Surrogate