Robert, a widower, created an ILIT four years ago and transferred his $3 million whole-life policy into the trust. Robert established the trust to remove the death benefit from his gross estate and to provide his estate with liquidity to pay his estate tax. The trust explicitly directs the trustee, his bank, and the co-trustee, his brother Larry, to purchase assets from Robert’s estate at his death. The bank will professionally manage the estate assets purchased by the trust for the benefit of Robert’s two children, the trust beneficiaries. Which of the following statements is correct?

A.    When Robert dies, the $3 million proceeds will not be included in his gross estate because he survived the three-year term.
B.    When Robert dies, the $3 million proceeds will be included in his gross estate because the trustee was obligated to use the proceeds to purchase assets from his estate.
C.    he assets in the trust will be included in Larry’s gross estate at death because he is the trustee.
D.    The children, as beneficiaries of the trust, have incidents of ownership in the life insurance policy.

Answer rating: 100% (QA)

B When Robert dies the 3 million proceeds will be included in his gross estate because the trus... View the full answer