Trust experts, can you help? I have a client who set up an Irrev. Life Insurance Trust in 2008 naming his two children as beneficiaries. He has a trustee he sends the insurance premium to, and she in turn pays the premium. The trust generates no taxable income. Lawyer who set up the trust is telling the client to file a 1041. I'm thinking this isn't necessary -- no taxable income. Anyone been through this exercise before with an ILIT? Is this a complex trust? Thank you.
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Bump....anyone? -
The monies contributed to the trust to pay the life insurance premiums are considered gifts to the trust, and qualify for the annual exclusion from gift tax. All this does is avoid Estate Tax for the grantor, since the trust owns the policies and the death benefits are paid to the trust for distribution to the beneficiaries. There is no income and shouldn't be any expenses. No 1041 needs to be filed.Comment
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Thanks, Burke. Appreciate the response and the confirmation.Comment
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