Golden Opportunities

Question: We’ve discussed that at the death of a spouse, a Family Trust can be funded with up to $1,500,000 and the assets will grow and be transferred to the beneficiaries (children) without any estate taxes. What more could they want?

• More money!! For our example, let’s assume that our Family Trust is funded with $500,000 and the assets are invested so as to generate average annual growth of 5%.
• If the widow lives to her age 83, the Trust assets will have grown to $1,039,464. But could the children have inherited more? The answer is probably.

Question: That sounds pretty good! Are you suggesting more aggressive investments?

• On the contrary. If Mom is in reasonable health, the Trustee could use the assets to purchase a $1,500,000 policy on Mom’s life. Instead of investing the assets to generate 5% average annual growth, the Trustee could pay $150,000 for 4 years.
• During the four years, the $500,000 would decrease by $150,000 but the remaining money would be generating growth.
• At the end of 4 years, there would still be about $42,000 in the Trust plus the policy for $1,500,000 would be paid for.
• During Mom’s lifetime, the cash would grow to about $75,000.
• At Mom’s death, the children would now have not $1,039,464 but $1,500,000 plus approximately $75,000 or $1,575,000
• Who would not want an extra $500,000???

Securities offered through LINSCO/Private Ledger (Member NASD, SIPC) Sources: LPL Planning; Phoenix Life Insurance