Is the Estate Tax Still in effect?

The tax cuts & jobs act have expanded the credit from the federal estate taxes and are most likely to influence the philanthropic as well as insurance world. In this piece, we talk about the expansion of tax cut and job act and the likely impact of it on the various sectors. However first let’s have a review of how much expansion has been made? The basic exclusion amount has been doubled from $5 million to $10 million and it has been in effect from Dec. 31, 2017. In order to get the deduction form the estate tax, affluent donors use life insurance policies as charity. With the transfer of wholly paid policy the donor can claim a charity generated income tax deduction.

If we try to consider this point from the perspective of a donor then there are certain benefits associated with the charitable life insurance.

However, there is one more thing to consider before getting into the whole tax deduction drama. The donor expectation regarding the target may or may not be fulfilled. During the life duration, a donor has the access to his assets in case of any contingency arisen.

However, the financial advisers are brainstorming about the possible consequences of the funding a life insurance for the tax purpose. They are of the view that whether or not is its worth to put the funds in the life insurance for the tax that they never have to pay?

On the other hand, there are closely held businesses that would require the liquidity for buying the interest of the deceased. Furthermore many affluent individuals find the life insurance an attractive investment. For such individuals, the return that they have is much larger than handling the payments of an insurance. However, there are various other who think they eliminate the need for a life insurance and conveniently contribute the life insurance to the charity. Before further proceeding with your life insurance policy here I want to ask some questions regarding life insurance charity.


You must have to ask the donor his purpose for entering into a life insurance arrangement. It is pertinent to have a clear and meaningful purpose for qualifying as the charitable beneficiary.


What about premiums or any kind of such payment? The insured has to be qualified to handle the payments of the insurance policy when needed? Furthermore, who would be able to monitor the performance of the policy within a charitable organization? With an environment of the low-interest rate, the insurance policies need to be reviewed on the regular basis. Furthermore, we also have to keep a skeptic eyes on the additional premiums as well. If the charitable organization refuse to pay the additional premiums then what would be the next step to be taken?  Also, we have to plan a strategy to combat each and every situation regarding the possible failure of the policy on the behalf of each party.

The deduction in the estate taxes due to recent expansion although have a significant decreasing impact on the amount of taxes financial well has to pay, however, that does not completely end the tax as it is still in effect.