Cecilia recently purchased a $$2$ million policy on her life. A few weeks later, after her attorney completed drafting an irrevocable trust to hold the policy and receive the proceeds upon her death, Cecilia assigned ownership of the policy to the trust. The terms of the trust provide that the trustee may make distributions of trust income or principal to or for the benefit of Cecilia's children and grandchildren until her death, at which point the property will be divided into separate shares for each of Cecilia's two children. Cecilia's brother is designated as trustee. In each of the two years after creating the trust, Cecilia paid the $$20,000$ annual premium on the policy. A few weeks after making the second annual premium payment, Cecilia died.

$($a$)$ Discuss the ET and GT consequences of these transactions.

$($b$)$ What, if anything, would you change from a tax planning standpoint?

Answer rating: 100% (QA)

a 1 Estate Tax ET Consequences By assigning ownership of the 2 million life insurance policy to the irrevocable trust Cecilia effectively removed the ... View the full answer