For Texans who've built significant wealth, permanent life insurance isn't just protection — it's the most tax-efficient tool for transferring that wealth to the next generation.
Federal estate taxes can consume up to 40% of estates above the exemption threshold — paid in cash, often within 9 months of death.
Without liquidity planning, heirs may be forced to sell real estate, businesses, or investments at unfavorable prices to pay estate taxes.
Without a deliberate strategy, wealth transfers erode with each generation through taxes, divorce, poor management, and competing claims.
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The ILIT is the single most powerful estate-planning tool for high-net-worth Texans. Here's how it removes life insurance proceeds from your taxable estate entirely.
An estate planning attorney establishes an irrevocable trust. You are not the owner — the trust is. This separation is what removes the death benefit from your estate.
You make annual gifts to the trust (using your annual gift tax exclusion — $18,000 per beneficiary in 2024). The trustee uses these gifts to pay life insurance premiums.
The trust owns and is the beneficiary of the policy. Because you don't own it, the death benefit is not counted as part of your taxable estate when you die.
When you die, the death benefit passes directly to your heirs — estate-tax-free, income-tax-free, and immediately available to pay estate taxes on other assets without a forced sale.
Important: An ILIT is irrevocable — it cannot be changed once established. Proper setup requires an estate planning attorney and a coordinated advisor. Tower Hill works alongside your legal team to implement the insurance component correctly.
When structured properly inside an Irrevocable Life Insurance Trust (ILIT), life insurance proceeds pass to beneficiaries outside of the taxable estate. The death benefit is not subject to estate taxes and provides immediate liquidity — often used to pay estate taxes on illiquid assets like real estate and business interests without forced sales.
A survivorship policy covers two lives — typically spouses — and pays the death benefit only when the second insured dies. Because estate taxes are typically deferred until the surviving spouse's death, this structure provides the exact benefit at the exact moment it's needed, at a significantly lower premium than two individual policies.
The target is typically the projected estate tax liability. A licensed advisor will estimate your estate value, apply current exemption thresholds, project growth, and calculate the tax exposure. The insurance death benefit is sized to cover that gap — ensuring heirs receive their full inheritance rather than a portion consumed by taxes.
Both, and they should coordinate. An estate planning attorney drafts the trust documents, will, and legal structure. A licensed insurance advisor designs and implements the life insurance component. Tower Hill's advisors work collaboratively with your existing legal and financial team or can refer you to estate planning attorneys in Texas.
Legacy planning requires a personalized approach. Speak with a Tower Hill advisor who specializes in high-net-worth estate planning strategies for Texas families.