The current estate tax laws sunset in 2026 unless different legislation is enacted. Some clients may become exposed to estate taxes. Annuity Arbitrage is one way to reduce or eliminate their estate tax exposure.
Annuity Arbitrage
The State of Illinois imposes an estate tax on individuals with a net worth exceeding $4 million at death. To be more punitive, the estate tax starts from dollar one. Annuity arbitrage can help.
To avoid exceeding a $4M net worth, Ruth can annuitize some of her assets and purchase life insurance outside her taxable estate to maximize her heir’s inheritance. In addition to helping Ruth avoid the IL estate tax, she reduces her chance of becoming federally exposed when the federal exemptions are lowered. Her family will inherit her full estate plus the life insurance proceeds. She will increase her income and peace of mind knowing she has avoided taxes and has extra income to spend or gift.
Ruth’s Strategy
Lifetime Income Studies
Planning would be easier if we only knew when someone was going to die. Of course, this will almost always be a missing variable in the planning process. What we do know is annuities provide predictable income and peace of mind. Those who live the longest will benefit the most because of mortality credits.
We continue to learn about non-financial reasons people benefit from lifetime income annuities. This is not a recent revelation; our awareness of these benefits has endured for quite some time. In fact, Jane Austen, in her 1811 book ‘Sense and Sensibility,’ stated: ‘If you observe, people always live forever when there is an annuity to be paid them.'”
Can longevity insurance increase longevity? Launch the following link to learn more:
Annuities and Moral Hazard
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