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Overview
Why life insurance?
Types of life insurance
Who should own the policy —
an individual or a trust?
How life insurance in an
irrevocable trust works
Ways to fund the purchase of
life insurance in a trust
Family
Take care of those who
matter most and maximize
your wealth
Term life insurance and
permanent life insurance
Spousal Lifetime Access Trust
Leveraged Credit Shelter Trust
Life insurance for blended
families
Special Needs Trust
Dynasty Trust
Incentive Trust
Grantor Retained Annuity Trust
Intentionally Defective
Grantor Trust
Business
Protect your business from
the unexpected
Buy/sell succession strategy
Equalizing your estate
Key person protection
Business loan
collateralization
Philanthropy
Making your wealth go
further for the causes and
people who mean the most
Charitable gi of life
insurance
Charitable Remainder Trust
Let’s connect
Helping you pursue your
goals with life insurance
Estate planning using life insurance I 2
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed, or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”).
MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC. Merrill Lynch Life Agency Inc. (“MLLA”) is a licensed insurance agency. Trust and fiduciary services are provided by Bank of America, N.A., Member FDIC. MLPF&S, MLLA and Bank of America,
N.A. are wholly owned subsidiaries of BofA Corp.
Merrill Private Wealth Management is a division of MLPF&S that offers a broad array of personalized wealth management products and services. Both brokerage and investment advisory services (including financial planning) are offered by the Private Wealth Advisors
through MLPF&S. The nature and degree of advice and assistance provided, the fees charged, and client rights and Merrill’s obligations will differ among these services. The banking, credit and trust services sold by the Private Wealth Advisors are offered by licensed
banks and trust companies, including Bank of America, N.A., Member FDIC, and other affiliated banks.
Investment products offered through MLPF&S and insurance and annuity products offered through MLLA:
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value
Are Not Deposits Are Not Insured by Any Governmental Agency Are Not a Condition to Any Banking Service or Activity
Estate planning using life insurance I 3
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You may already own life insurance or be aware of its primary use — providing money to your family or other beneficiaries when you are no longer
here. Yet, the value that life insurance can bring to a comprehensive, integrated estate plan goes far beyond providing cash liquidity through the
payment of death benefits.
Whether you want to leave a legacy to your family for generations to come, assure the continuation of a business you have built or make a significant impact through philanthropy, the
strategic use of life insurance can help you address your goals. Your advisor, working together with insurance specialists, trust specialists and your attorney, can help you identify the right life
insurance strategy for you.
Why life insurance?
Diversification Guarantees
Competitive
rate of return
Tax-advantaged
death benefit
Tax-deferred
growth potential
Liquidity
Estate planning using life insurance I 4
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Benefits of life insurance
Life insurance can be a versatile tool and offer powerful benefits to enhance your legacy and complement your overall financial strategy.
Diversification
As part of a well-balanced
estate plan, life insurance
offers the potential for
the diversification of
non-correlation to
traditional market-driven
investment vehicles.
1
Guarantees
Certain permanent life
insurance policies can
provide guaranteed
lifetime protection; as long as
the premiums are paid, excess
withdrawals are not taken and
the policy remains in-force.
Other assets that are tied to
market conditions cannot be
relied upon to assure you of
the value of the wealth you
transfer in that way.
2
Competitive
rate of return
Upon the insured’s death,
the death benefit paid to
beneficiaries is not income
taxable. Therefore, the
potential rate of return on
the premiums you pay can
be competitive compared
to taxable investments,
potentially ensuring more
money for the people you
love and the things you
care about.
Tax-advantaged
death benefit
When properly structured
in an irrevocable trust, life
insurance death benefit
proceeds are distributed
to heirs free of income,
gi and estate taxes.
3
Tax-deferred
growth potential
Besides death benefit
coverage, permanent life
insurance may include a
cash-value element that
builds tax-deferred
over time. You can access
the cash value through
tax-advantaged loans or
cash withdrawals. This can be
beneficial for supplementing
your lifetime income needs.
4
Liquidity
As long as a beneficiary is
named on the policy, life
insurance death benefit
proceeds are paid out in cash
without the potential delays
of probate, and thus become
quickly available to heirs to
cover immediate expenses.
The death benefit proceeds
can help to pay estate taxes,
purchase assets from your
estate to prevent a forced sale
or lend money to the estate.
1
Diversification does not ensure a profit or protect against loss.
2
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill or its affiliates, nor does Merrill or its affiliates make any representations or guarantees regarding the claims-paying
ability of the issuing insurance company.
3
Life insurance death benefit proceeds are generally excludable from the beneficiary’s gross income for income tax purposes. There are a few exceptions, such as when a life insurance policy has been transferred for valuable consideration. There is a three year look-back
period that may apply after policy transfer. If the transfer takes place within the three years before death, the proceeds from the policy are counted in the estate for tax purposes.
4
Loans and withdrawals reduce policy cash value and the death benefit, may have tax consequences and may cause the policy to lapse. Policies that are structured as Modified Endowment Contracts (MECs) do not have the same tax advantages as non-MEC designs and
are not suited to this purpose.
Why life insurance? (continued)
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Types of life insurance
You have a choice between two fundamental categories of life insurance — term life or permanent life.
Term Life Insurance Permanent Life Insurance
• Offers death benefit coverage, usually up to age 95.
• Has no cash value and typically has level premiums for a pre-determined period of time,
usually ranging from five to forty years.
• During the level premium period, the death benefit is guaranteed. Aer the level-premium
period, premiums increase significantly each year, based on the insured’s age and amount
of coverage.
• Provides protection to younger individuals and families at an affordable price.
• Can provide income replacement and family protection during peak earning years or
while raising a family.
• Offers death benefit coverage for the insured’s entire lifetime, as long as sufficient
premiums are paid to keep the policy in force.
• Protects family by providing financial security at your death.
• Can enable wealth transfer goals.
• Policyholders may be able to access policy cash value through withdrawals and loans,
depending on terms of the policy.
5
Estate planning using life insurance I 5
5
Loans and withdrawals reduce policy cash value and death benefit, may cause the policy to lapse and may have tax consequences. Not all permanent insurance has cash value.
Who should own the policy — an individual
or a trust?
Life insurance can be used to maximize your wealth and pass it on to the people or causes that are important to you with less risk and the potential
for greater tax efficiency.
Creating a tax-efficient pathway for wealth transfer using an irrevocable trust
When your life insurance policy is owned by a properly structured irrevocable trust, it can:
Enable you to dictate how and when the death benefit
proceeds will be distributed to your trust beneficiaries
Allow the death benefit proceeds to pass outside of your
estate — providing greater tax-efficiency
Provide liquidity to help offset federal or state wealth
transfer taxes (preventing a forced sale of estate assets)
Specific types of irrevocable trusts can be draed by your attorney to help meet various family, business and philanthropic goals.
More flexibility and control when owned individually
While holding your life insurance policy in a trust offers a host of powerful benefits, there are a few potential drawbacks you may want to consider:
Placing any assets in an irrevocable trust
means you relinquish all control over those
assets; and any future modifications to
the trust must be made by the trustee
Depending on the complexity and size of
your estate, you may not need a trust’s
protections surrounding the use and
taxation of death benefit proceeds
If you plan to use your annual gi
exemption to transfer assets to a trust,
you won’t be able to make other tax-free
gis to that beneficiary in the same year
There’s no guarantee that current gi
and estate tax laws won’t change in the
future; an irrevocable trust will make
altering your estate plan more challenging
Estate planning using life insurance I 6
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Grantors
Establish a trust and
transfer cash as a gi
Insurance
Company
Heirs
Estate and income
tax-free payment
Irrevocable trust
Trust pays
premium
Death
benefit
How life insurance in an irrevocable
trust works
Estate planning using life insurance I 7
The first step is to establish an irrevocable trust, which will serve as the owner and beneficiary of a life insurance policy insuring your life. As grantor of the irrevocable trust, you name
another party or parties to serve as trustee. Once established, the trustee can use trust assets to pay life insurance premiums. In addition to life insurance, an irrevocable trust can own
almost any kind of asset: cash, stocks, bonds, mutual funds and real estate.
It is important to remember that it is irrevocable, and you will typically be unable to change its terms without legal proceedings once it has been established. Additionally, the assets that
you transfer to the irrevocable trust are no longer your assets. The trustee will manage the trust assets, and the individuals who have been named as beneficiaries will receive those assets
pursuant to the terms of the trust.
Because the assets, including the insurance policy on your life, are no longer your own, any benefits received by you from the trust could nullify the purpose of the trust and bring the life
insurance death benefits into your taxable estate. Therefore, living benefits, such as those from long-term care and chronic illness coverage, are not typically included.
For illustrative purposes only.
Did you know?
The benefits of purchasing life insurance in an
irrevocable trust can be even greater if a married couple
has the trustee purchase a second-to-die life insurance
policy. Generally, the cost will be less than two single-
life policies, so for the same premium, you may be able
to purchase a larger amount of coverage.
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Ways to fund the purchase of life insurance
in a trust
Depending on your current financial situation, you may want to consider various strategies for funding an irrevocable trust to purchase life insurance.
Giing
Giing assets to pay the life insurance premiums held in a trust provides an opportunity to leverage the value of the annual gi tax exclusion or lifetime gi exemption. If the trustee uses gis to
pay for life insurance, the death benefit can oen be substantial as compared to the value of the original gi — thus maximizing the wealth you pass on.
Shaping your wealth transfer plan to help minimize transfer taxes
You
Your spouse
Marital deduction:
Unlimited tax-free
transfers to spouses
who are U.S. citizens
Beneficiaries
Annual exclusion:
$17,000 per recipient
per year
Lifetime gi exemption:
Allows aggregate lifetime
gis up to $13.6 million in
2024 free of federal gi tax
Taxable transfer:
At gi tax rates
Education/
healthcare
Payments made
directly to a provider
(such as a school or
physician) for qualified
tuition or healthcare
expenses are not
considered taxable
gis
Charitable
entities
Charitable deduction:
Unlimited tax-free
transfers to qualified
charities
6
(Income
tax deductions may
be limited in certain
situations)
Estate planning using life insurance I 8
Federal gi, estate and GST exemption amounts
$ millions
2017 2018
2019
2020 2021
2022
2023
2024
2025* 2026
†
$5.49
$11.18
$11.40
$11.58
$11.70
$12.06
$12.92
$13.61
$5.00
* 2025 will be adjusted for inflation annually.
†
Year 2026 will revert back to pre-2018 levels or $5 million, subject to an annual inflation
adjustment from 2010.
The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) increased the allowable lifetime gift tax exemption
amount through 2025, after which it will revert to pre-2018 levels adjusted for inflation. This creates a
potentially limited window of opportunity to gift more.
6
Applies to gifts to private foundations as well as to public charities.
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Estate planning using life insurance I 9
Beneficiaries
Remaining death benefit free of income and estate taxes
Life
insurance
policy
Grantors
Life insurance
premium
Death benefit
proceeds
Loan repayments based on the
terms of the lending agreement
Loan
Funds remaining aer note repayment
Trust
Ways to fund the purchase of life insurance
in a trust (continued)
Personal loans
Another tax-advantaged way of paying life insurance premiums within an irrevocable trust is through a personal loan between you, as grantor, and your irrevocable trust. Because you are lending,
rather than giing, money to the trust for the purchase of the life insurance, higher amounts may be utilized without triggering gi taxes. The loaned funds must be repaid with interest at a rate
determined by the IRS
7
to be considered an arm’s length transaction.
You should work with an attorney to develop a lending agreement.
Did you know?
If your current assets exceed what is necessary to
support your retirement lifestyle, you may be able
to increase your legacy with an asset repositioning
strategy using life insurance. The investments you
have accumulated for retirement may not be the most
efficient vehicles for transferring wealth to your heirs.
Assets such as IRAs, annuities and municipal bonds
held in your estate at death may be subject to taxation.
Incorporating life insurance has tax benefits that could
increase the overall value of wealth transferred.
7
Internal Revenue Code Section 1274(d) governs the determination of the interest rate associated with private loans. These Applicable Federal Rates (AFRs) are published monthly by the IRS.
(Source: https://www.irs.gov/applicable-federal-rates)
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Take care of those who matter most and
maximize your wealth
If you have loved ones you want to protect, it’s important to consider the impact the loss of your income would
have should you unexpectedly die. Life insurance can provide ready cash to your beneficiaries. The liquidity of a
death benefit can help cover your family’s immediate financial needs, replace future income and help them reach
important financial goals — providing cash to compensate for the loss of planned savings and potential earnings.
Perhaps you want to ensure the welfare of generations of your family into the distant future. Or maybe you need
to address a special family situation that presents particular challenges when planning for wealth transfer — such
as a special needs individual who will require continual care or members of a blended family whom you want to
treat individually but fairly.
Life insurance, properly structured within various trust instruments, can help you achieve these goals.
It’s important to me…
To provide income protection and help my family achieve planning
goals if I die unexpectedly
Term Life 11
Permanent Life 11
To provide for my spouse during my lifetime and aer by
minimizing tax burdens
Spousal Lifetime Access Trust 12
Leveraged Credit Shelter Trust 12
To have a wealth transfer plan that prioritizes my special family
situation
Life insurance for blended families 13
Special Needs Trust 13
To secure my legacy by my standards
Dynasty Trust 14
Incentive Trust 14
That my heirs get the maximum value from the assets I leave behind
Grantor Retained Annuity Trust 15
Intentionally Defective Grantor Trust 15
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It’s important to me...
To provide income protection and help my family
achieve planning goals if I die unexpectedly
Regardless of your family structure, life insurance can provide your loved ones with much needed cash if you should unexpectedly die — allowing
them to worry less about the future.
The liquidity afforded by
a policy’s tax-free death
benefit could help your
family avoid both short-
and longer-term financial
hardships by:
Paying off a mortgage or other debt
Providing a replacement for lost income or services (such as childcare)
Facilitating “self-completion” for your long-term financial goals (such as retirement or education savings), by providing the cash to
compensate for the loss of future savings and potential earnings
Affording the means to settle final medical and estate expenses
There are two basic life insurance options to help you achieve these goals:
1
Term life insurance
which lasts for a specific,
pre-determined period of time
2
Permanent life insurance
which lasts your entire lifetime as long as sufficient
premiums are paid to keep the policy in force
Depending on your needs, you may want the affordability of term life, which can be an ideal solution
fo
r temporary, short-term needs like paying off a mortgage. Or you may prefer the lifelong
protection and ability to build cash value that most permanent life insurance policies offer.
To provide for my spouse during my lifetime
and aer by minimizing tax burdens
Estate planning using life insurance I 12
Minimizing taxes on the estate that will pass on to your spouse can make a significant difference in the net amount he or she will inherit. By properly
structuring assets within an irrevocable trust, you can protect those assets from estate taxes. Life insurance in a trust can further protect assets
from income taxes. Life insurance can be combined with specific types of trusts to address particular needs, such as ensuring the financial comfort
of a spouse.
Spousal Lifetime Access Trust (SLAT)
A SLAT is an irrevocable trust used by married couples who want to maintain
their current lifestyle and the lifestyle of the surviving spouse, and also leave a
final legacy.
Funding a SLAT with your gi tax exemption allows the trustee to use those funds to
purchase a life insurance policy for you with your spouse as beneficiary. Your spouse can
take federal income tax-preferred loans or cash withdrawals from the policy during your
lifetimes to help supplement future income or fund other long-term goals.
Aer your death, the death benefit and other assets are passed on to your spouse
outside of your taxable estate. Upon the death of the spouse, the assets owned by the
trust, including the life insurance death benefit proceeds, will pass to the designated
beneficiaries and will potentially remain outside the taxable estate of the surviving
spouse, leaving a larger legacy to those important to you. Proceeds can also be used to
purchase assets from the estate or lend money to the estate to offset estate taxes.
Leveraged Credit Shelter Trust
A leveraged credit shelter trust helps married couples take advantage of the
full estate tax exemptions of each spouse to maximize what is finally le for
children and other heirs aer they both pass away.
If you die without a trust in place, your spouse can use a credit shelter trust (sometimes
called a bypass trust) to pass along assets so they are not considered part of his or
her estate and not subject to estate taxes. These assets are used to purchase a life
insurance policy on the surviving spouse with the credit shelter trust as the owner and
beneficiary of the life insurance policy. Upon the death of the surviving spouse, the
assets owned by the trust, including the life insurance death benefit proceeds, will pass
to the designated beneficiaries and will potentially remain outside the taxable estate of
the surviving spouse, leaving a larger legacy to those important to you.
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Estate planning using life insurance I 13
To have a wealth transfer plan that
prioritizes my special family situation
When it comes to families, each has its own makeup and unique circumstances. A properly structured trust provides the control to accommodate
different family scenarios. In a variety of instances, a life insurance policy within an irrevocable trust holds the key to securing a specific wealth
transfer amount while minimizing taxes.
Life insurance for blended families
You may be part of a “blended family” because you’ve remarried aer a
divorce or as a result of widowhood. Blended families may include children
who are far apart in age, with some requiring provisions for their continued
care and education, while others are grown and self-sufficient.
If certain trust assets, such as the family home or education funds, are earmarked
for younger children, life insurance within the trust can be used to provide a specific,
equalized amount for older children, while minimizing taxes. Similarly, if one child will
take over your business upon your death, other children can inherit similar, guaranteed
amounts through permanent life insurance policies held in a trust.
Special Needs Trust
If caring for a special needs child or other heir is important to you, a properly
structured special needs trust with life insurance offers unique benefits.
A special needs trust funded with life insurance can help you maximize the assets devoted to
this goal without impacting other goals, including funding your own retirement or providing for
other heirs. Aer your death, the death benefit proceeds will be used by the trustee to make
distributions to support the special needs individual and contribute to his or her quality of life.
The assets pass free of gi, estate and income taxes, so a larger amount will be available for
the welfare of the beneficiary. And because the assets are not owned by the beneficiary of
the trust, they will not jeopardize benefits under the Supplemental Security Income program,
including healthcare and other potential support programs.
It’s important to me...
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It’s important to me...
To secure my legacy by my standards
Estate planning using life insurance I 14
If you are leaving a legacy that ensures financial security and ease for your current family and future generations, you will find there are trusts
structured to help you build your dynasty. Additionally, a trust can provide you with a certain amount of control over your estate even aer death
by allowing you to set parameters that influence how your legacy is used. In conjunction with life insurance, certain trusts may protect your
assets from multiple levels of transfer, estate and income taxes.
Dynasty Trust
A dynasty trust is an irrevocable trust that serves as a resource to provide
income and support to children, grandchildren and future generations.
With the assistance of an estate planning attorney, you can establish a dynasty trust
in combination with life insurance. This combination can be used to leave a multi-
generational legacy, up to limits imposed by the laws of the state which governs the
terms of the trust. The assets held in the trust in the form of life insurance are protected
from future federal gi and death taxes.
Incentive Trust
When it is important to you to influence the use or impact of assets you leave
to heirs, an incentive trust can allow for certain conditions to be imposed upon
beneficiaries of trust assets.
Perhaps you want to provide a certain amount of your wealth to a grandchild, for instance,
but are concerned that inherited money might lessen the child’s drive to pursue a higher
education or professional career. With this trust vehicle, you can specify that funds
can only be dispersed once the grandchild graduates from college, or any other legally
permissible requirement you, as grantor, might wish to impose. Combining an incentive
trust with life insurance may serve to minimize the effects of taxes.
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That my heirs get the maximum value from
the assets I leave behind
Estate planning using life insurance I 15
Do you have assets…
That could benefit from a valuation discount, such as a
minority stake in a private company?
That may appreciate substantially in value, such as
ownership in a company that could be sold or taken public?
That generate strong cash flow, such as commercial
real estate?
If you wish to arrange for the transfer of your highly appreciating assets to your heirs while minimizing taxes on that transfer, consider the following trust solutions. Both potentially
allow you to remove future appreciation from your taxable estate, leaving more for your heirs.
Grantor Retained Annuity Trust (GRAT)
The GRAT can help you minimize taxes and leave more to heirs by removing
future appreciation from your taxable estate from assets such as commercial
real estate or a successful business.
As grantor, you transfer specific assets into the trust, retaining the right to receive an annual
annuity payment from the gied assets for a certain number of years. As long as you outlive
the GRAT, when it terminates, any property remaining in the trust passes to the remainder
beneficiaries without any additional gi or estate tax consequences.
Individuals using GRATs oen pair the GRAT with a life insurance policy held in an irrevocable
trust that will provide funds to offset any estate taxes that might be triggered if the assets are
brought back into the grantor’s taxable estate as a result of an untimely death, but otherwise
passes to the trust beneficiaries. The income from the transferred assets can be used to pay
the life insurance premiums.
Intentionally Defective Grantor Trust (IDGT)
You can transfer rapidly appreciating assets to heirs with minimal or no transfer
tax costs by structuring the transfer as a sale (or gi) to an IDGT.
With this strategy, you make an initial taxable “seed gi” to the trust and pay the income
tax, reducing the tax burden for your heirs. The trust purchases or borrows
8
additional
assets from you that can be valued at up to nine times the value of the seed gi by issuing
an installment note. Future appreciation of the assets sold to the trust is outside of your
taxable estate. The estate includes any remaining portion of the note, effectively “freezing”
the value of the estate.
Income generated by trust assets can be used to purchase life insurance on the life of the
grantor. Death benefit proceeds can be used for wealth transfer taxes and other costs at the
grantor’s death.
8
The loaned funds must be repaid with interest at a rate determined by the IRS to be considered an arm’s length transaction. You should work with an attorney to develop a lending agreement. Internal Revenue Code Section 1274(d) governs
the determination of the interest rate associated with private loans. These Applicable Federal Rates (AFRs) are published monthly by the IRS. https://www.irs.gov/applicable-federal-rates
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Estate planning using life insurance I 16
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Protect your business from the unexpected
You may already own life insurance or be familiar with its more common uses. But do you know all of the ways it
might potentially benefit your closely held business? The untimely death of you, a partner or a key employee can
leave both the business and your family vulnerable. Life insurance, however, can offer a layer of protection and
invaluable funds to facilitate:
Business partners
being able to buy
out each other’s
share if one partner
passes away.
Equalizing your estate
when some family
members are active
in the business while
others aren’t.
Continuity and lost
revenue replacement
in the event of a key
employee’s death (while a
replacement is identified,
hired and trained).
Collateral for a
business loan so
you don’t need to
put your personal
assets at risk.
It’s important to me…
That my business continues on and my heirs are provided for
Buy/sell succession strategy 17
Equalizing your estate 17
Key person protection 17
Business loan collateralization 17
It’s important to me...
That my business continues on and my
heirs are provided for
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Estate planning using life insurance I 17
Buy/sell succession strategy
A buy/sell succession plan defines how you and a partner will distribute
interests in your jointly held business when one of you dies. Life insurance can
be used as a tool to fund this plan.
Using life insurance to fund this plan ensures the transition will be smooth by providing cash
from the death benefit, which enables the surviving owner to buy out the deceased partner’s
interest from his or her heirs. Life insurance policies are purchased on each owner and can be
paid for by the business or by each owner.
A buy-sell agreement funded with life insurance can help prevent difficult situations in which a
partner finds him- or herself in business with a surviving spouse or other heirs who know little
about the business or in which the business must be liquidated or sold in order to settle the
deceased partner’s estate.
Equalizing your estate
When your business represents a large portion of your estate, it can be challenging
to ensure a fair inheritance to heirs who are not active in the business.
The liquidity created by the death benefit proceeds provides a legacy for those not involved or
interested in your family business and avoids the forced liquidation of the business in order to
fairly divide your assets.
The policy could be owned by you, your heirs or an irrevocable trust, depending on your
business succession and wealth transfer objectives.
Key person protection
Life insurance can help your small business survive the death of a key
employee by providing the funds needed to replace lost revenue while hiring
and training a replacement.
Implementing a key person business continuation plan is easy. The business purchases life
insurance policies for each key individual, pays the premium and receives the death benefit.
Key employees could include any employee whose death would create a disruption through
the loss of their unique skills or experience.
Business loan collateralization
Taking on business debt secured with your personal assets could put both your
family and the business at risk in the event of your untimely death.
By purchasing a life insurance policy to be used as loan collateral, however, you can guarantee
the debt repayment and avoid any risk to your personal assets.
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Making your wealth go further for the
causes and people who mean the most
If philanthropy has been a way of life for you, you may want that legacy of giving to continue even aer your
passing. Perhaps you have been devoted to supporting a particular charitable organization and want to make sure
that they are able to continue their work. Life insurance can be a potential solution to such concerns, ensuring a
guaranteed amount to the charity of your choice, while offering tax benefits to your estate and heirs.
Life insurance can also provide a way for you to take care of the charities that matter to you without significantly
reducing the amount your heirs receive, providing you with a way to potentially guarantee inheritances and replace
wealth earmarked for philanthropy.
It’s important to me…
To leave a significant gi to my favorite charity upon my death
Charitable gi of life insurance 19
To continue my impact through philanthropy while feeling sure my
family is taken care of
Charitable Remainder Trust 20
Estate planning using life insurance I 18
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It’s important to me...
To leave a significant gi to my favorite
charity upon my death
Estate planning using life insurance I 19
An outright gi of life insurance can increase your philanthropic legacy and provide a guaranteed amount to the charity of your choice, acting as an
important part of your overall estate plan.
Charitable gi of life insurance
Charitable gis of life insurance are usually structured in one of the following ways:
You can purchase a new life insurance policy where you
are the owner and the charity is the beneficiary.
You will not receive a charitable income tax deduction,
and death benefit proceeds will be included in your
estate for tax purposes. However, proceeds will pass to
the charity income tax-free.
You can pay premiums on a policy insuring your life that
is owned by the charity, that is also the beneficiary.
Premiums paid are considered tax deductible as
charitable donations.
You can donate an existing policy insuring your life to a
charity, so the charity is the owner and beneficiary of the
life insurance policy.
The donation of the existing policy, plus any ongoing
premiums, will be considered tax deductible as charitable
donations.
Because the rules regarding charitable income tax deductions are complex, consult your legal and/or tax advisor to determine the amount of your deduction.
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It’s important to me...
To continue my impact through philanthropy
while feeling sure my family is taken care of
Charitable Remainder Trust
For many families, charitable gi planning comes with the concern that they will
compromise the financial security they wish to provide for their spouse or heirs.
A Charitable Remainder Trust addresses this “split interest” by allowing distribution payments
to the grantor, spouse or other designated beneficiary(ies) from interest-producing assets
within the trust. Upon the death of the recipient or the end of a specified term not to exceed
20 years, the remaining trust assets are distributed to the designated charity(ies).
In addition to providing financially for your family and favorite causes, Charitable Remainder
Trusts allow for a tax deduction
9
and tax-deferral of the highly appreciated asset, allowing you
to diversify a concentrated position without triggering immediate capital gains taxes.
Life insurance, when owned by a Charitable Remainder Trust, can be a useful tool in replacing
wealth transferred to charity and preserving the value of the legacy intended for your heirs.
Estate planning using life insurance I 20
9
Charitable income tax deductions are based on the calculated value of the transferred assets to the trust. It is important to work with your tax advisor to determine the actual amount of the deduction.
Helping you pursue your goals with
life insurance
Estate planning using life insurance I 21
A comprehensive strategy
Your advisor brings together a full understanding of your priorities and goals as well as your
assets, liabilities, risk tolerance and other financial factors to help create a comprehensive
strategy. With an advisor you trust and who understands what you’re trying to achieve,
selecting a life insurance solution doesn’t have to be overwhelming.
Choice of insurance solutions
The insurance products we make available to you have gone through our due diligence,
which means they meet our selection criteria based on factors such as ratings, financial
strength and product innovation. Your advisor, along with our insurance specialists and your
legal and tax advisors, will assess different features and benefits to find a potential solution
that most closely aligns with your goals and preferences.
Contact your advisor
today to identify life
insurance solutions
that may help you
address your wealth
transfer goals and
priorities.
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Estate planning using life insurance I 22
IMPORTANT INFORMATION
The issuing insurance company, MLLA, MLPF&S and their representatives do not provide tax, accounting or legal advice to clients. Clients should consult their own independent advisors as to any tax, accounting or legal statements made herein.
This material does not take into account a client’s particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of
brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations
of the parties. It is important to understand the differences, particularly when determining which service or services to select. For more information about these services and their differences, speak with your advisor.
Life insurance policies contain fees and expenses, including cost of insurance, administrative fees, premium loads, surrender charges and other charges or fees that will impact policy values. Life insurance death benefit proceeds are generally excludable from the
beneficiary’s gross income for income tax purposes. There are a few exceptions, such as when a life insurance policy has been transferred for valuable consideration.
If you transfer existing life insurance to a trust, you may incur gift taxes. Also, the insurance policy must be transferred to the trust at least three years before death occurs in order for the proceeds to be excluded from your estate. The decision to transfer current life
insurance to a trust should be reviewed in the context of the survivor’s needs and in conjunction with a qualified attorney.
Trusts should be drafted by an attorney familiar with such matters in order to take into account income and transfer tax laws (including generation-skipping transfer tax). Failure to do so could result in adverse tax treatment of trust proceeds. Creating and funding a trust
is a sophisticated estate planning technique and your legal and estate planning advisor(s) should be consulted prior to making any estate, tax, or investment decisions.
All guarantees and benefits of the insurance policy are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill or its affiliates, nor does Merrill or its affiliates make any representations or guarantees regarding the claims-paying
ability of the issuing insurance company. All annuity contract or rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company.
Trust and fiduciary services are provided by Bank of America, N.A., Member FDIC, and a wholly-owned subsidiary of Bank of America Corporation.
© 2024 Bank of America Corporation. All rights reserved. | MAP6131585 | 360000PM-0224 (ADA)
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