Survivorship Stand-By Trusts
Life insurance has long been recognized as a cost-effective and tax-efficient method of funding estate liquidity, and has played a pivotal role in many popular estate planning techniques, including the Irrevocable Life Insurance Trust or "ILIT" - a cornerstone of estate planning. However, in traditional ILIT planning, the policy is owned by the trust from the inception of the plan in order to exclude the insurance proceeds from the taxable estate. Therefore, flexibility, access, and control can be compromised.
A Survivorship Stand-By Trust ("SST") represents a more flexible variation of the traditional ILIT funded with a survivorship life insurance policy and presents a unique estate and retirement planning opportunity. Within the framework of a single plan, the SST accommodates the dual objectives of estate liquidity and lifetime income, using a single financial product and planning concept, while minimizing income, estate and gift taxes. In addition, the SST promotes flexibility and control by permitting modifications to the plan, including changing the beneficiaries or terms of the SST, which does not become operative and irrevocable until death.
With the uncertainties of the estate tax laws and the estate planning landscape, the SST will likely appeal to those individuals seeking planning solutions which foster flexibility to accommodate future changes in tax law as well as their future circumstances and objectives.
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