Insurance

Does life insurance count toward the estate tax exemption?

Life insurance death benefits are included in your taxable estate if you own the policy at death, even if the proceeds go directly to beneficiaries. However, if the policy is owned by an irrevocable life insurance trust (ILIT), the death benefit can be removed from your estate. This strategy becomes important when your total estate value approaches the federal exemption of $15,000,000. The trust receives the death benefit and distributes funds according to your wishes while potentially avoiding estate taxes.