Question about Inherritance??

[Shane]

From a life insurance perspective it is a good idea to have a trust set up and have the trust own and be the beneficiary of the policy otherwise the face amount of the policy will be counted in the estate hence subject to probate.

I assume you're referring to the use of an ILIT (irrevocable life insurance trust). This strategy is used to keep life insurance proceeds out of a person's estate for estate tax purposes. It isn't needed if all you want to do is avoid probate. For that, all you need to do is name your beneficiaries on the life insurance policy directly and the money will be paid out to them when you die without going through probate. If you own the policy rather than having an irrevocable trust or some other person own the policy, then the proceeds will count as being part of your estate for estate tax calculations whether the proceeds had to go through probate or not. Two different issues. Also, you can't be the trustee of the ILIT that you gift assets to for your heirs. There are some pretty strict rules and procedures that must be followed every year to keep all the i's dotted and t's crossed to make sure that the strategy actually works as intended. It's often necessary to hire an outside trustee to administer all of this, and that can cost a few hundred dollars a year. It's not cost effective or even necessary unless you are talking about a large estate and insurance policy and the prospect of paying out large amounts of estate tax if you don't use the strategy.

Obviously, the subject of estate planning is incredibly complex with gazillions of factors and angles to consider. You can't possibly explain or cover them all in a forum like this, even if you were in the business of providing general advice online for free.

People with estate planning questions and needs really need to seek out good advisers, accountants and attorneys and talk to their "team" about all the details of their own situation. Everyone has a different set of variables and family dynamics and personal preferences that all need to be considered. A strategy that is right for one person or family isn't going to be the right thing for someone else necessarily. That's what makes it fun though.

[Shane]

Randy is a smart guy.

Don't give him the big head.