Help For Uninsurable Seniors
If you have a large taxable estate and are uninsurable then you have probably have concerns. First you will be leving your heirs with potentially a substantial tax burden. Second, the government not you is deciding where your hard earned estate is going to benefit. Typically, life insurance would be used to mitigate this tax issue but if you are uninsurable then you will need to be more creative in your solutions.
One approach is to use an inter-generational split dollar agreement. This is a special structure set up with your heirs which allows you to transfer (or loan) a potentially large sum out of your estate to fund life insurance on your children. The taxable value of the split dollar entity to your estate will be a very large discount to the amount funded into it. For taxation purposes the capital paid in to the split dollar is paying for a benefit far in the future. The IRS calculates the net present value of that benefit, discounting for the time-value of money resulting in a substantial tax benefit.
This strategy is an effective way to reduce the estate taxes and transfer wealth to your heirs. It does not offer the level of mitigation that life insurance can but is an effective tool for high net worth seniors who do not have life insurance as an option. This approach is suitable for elderly seniors with an estate in excess of $5 million and a desire to leave the estate to their heirs.
