<p>Well, since only a tiny percentage of estates actually pay any estate taxes, it must be fairly hard to get that high.</p>
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<p>[How</a> many people pay the estate tax?](<a href=“http://www.taxpolicycenter.org/briefing-book/key-elements/estate/how-many.cfm]How”>How many people pay the estate tax? | Tax Policy Center)</p>
<p>So it’s not that unreasonable to assume one won’t be one of the 1 in 73, much less the one in 163.</p>
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In 20 years, when I am retired and not getting life insurance through work, and all of our term life insurance has gone away, we probably won’t have to worry about it either.</p>
<p>But today - because we properly insured ourselves (and barely at that - we may actually be a bit under-insured) - it might be an issue. Hence the planning.</p>
<p>And in 10 years, maybe the exemption is only $100K, not 1 or 2 million or more. Who knows?</p>
<p>I’m curious, garland - how much life insurance does your family have? What is your plan to protect your family in the event of a tragedy?</p>
<p>notrichenough - we discussed the basis and step up in basis. basically she said this is do fluid from year to year we just can’t worry about it.<br>
My parents bought their ‘big’ house back in 1973 so the gain to the trust would be significant.</p>
<p>I don’t think my dad’s estate is close to a million dollars. a few hundred thousand. He gets two pensions plus social security so he has plenty of income - more than enough for him to live on and it would be enough to provide him assistance if he ever needed it.</p>
<p>One nifty thing they did was, if any children pre-decease him, their share of the trust would pass directly to their children (grandchildren). It would not belong to the deceased child’s estate or spouse. If that happened and the grandchild was under 21 it would be held in trust for them to be used for their education and support until they reached 21.
Otherwise, he did not restrict the use of the money at all. If we want to gamble our share away we are free to do so.</p>
<p>Q. - Does life insurance become part of an estate? I thought not - that payment would go directly to the beneficiaries.</p>
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Well, my wife and I are the primary beneficiaries of each other’s insurance. If one of us goes first, the other would get a big pile of money which is now in their estate.</p>
<p>Now that I think about it, if we both died in a car crash at the same time, the insurance would go to the secondary beneficiaries (the kids), and not go into the estate. Our lawyer wants us to change the secondary beneficiaries to be our trusts, so there is some control over when the kids get the money.</p>
<p>notrichenough–to satisfy your curiosity, my H has a 500K life insurance policy which we took out when the kids were young and i did not work full time. They’re grown now, and i do. It will expire in a few years (it was cheaper because it had a twenty year term, IIRC). We can each support our own selves, so after that, we’ll just need enough for funerals, and jobs do come with small policies.</p>
<p>My plan to protect my family in the event of a tragedy is stockpiles of food and guns (jk.)</p>
<p>Just- life insurance death benefit does go directly to the beneficiary, however, it is still part of your estate for tax purposes. Life insurance proceeds are income tax free, but not estate tax free.</p>
<p>Rich people who buy a policy to pay the taxes on illiquid property- real estate, family business, etc. tend to put the policy into an irrevocable insurance trust, then it is not part of the taxable estate.</p>
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<p>That’s how ours is set up as well.</p>