With the passage of the Act in 2017, the estate tax exemption amount was increased to 11 million dollars, indexed for inflation for individuals. This amount will sunset in 2025, meaning it will revert back to 5 million index for inflation in 2025 unless the law is changed or the current law is made permanent.
Seeing that the estate tax exemption is so high, and even if reduced to the previous amount, the majority of individuals fall well below the threshold. Here is where the Revocable Trust comes into play.
The revocable trust can be used to own the life insurance or be the beneficiary of the life insurance. The benefit of the revocable trust holding the life insurance is that if you were to become incapacitated, your successor trustee will be able to keep administering the life insurance policy on your behalf.
In any event, you will want the revocable trust to be the beneficiary of the life insurance so that the death benefit proceeds are distributed to your successor trustee for the funds to be administered according to your trust.
A revocable trust gives you a lot of flexibility and control over an irrevocable trust. You can amend the trust at any time or even revoke it. Unlike an irrevocable trust, you can file the taxes for the assets in a trust under your own social security number, you will not need a separate taxpayer ID.
If you are well under the estate tax exemption amount then having a revocable trust to hold life insurance purposes its one of the best tools you can have as it provides the most flexibility and you will not have to pay estate tax in the first place.