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- Title
Beneficiary Defective Trusts: The Better Insurance Trust?
- Authors
Miller, Robert C.
- Abstract
The beneficiary defective trust (BDT) is a trust typically established by a parent for the benefit of a child. The child is usually treated as the owner of the trust under Sec. 678 of the Internal Revenue Code, but the trust is not includible in the taxable estate of the child. The BDT can be used to own business investments that the child might otherwise own personally. If the BDT is structured properly, the business interests it owns will not be included in the taxable estate of the child, but the child will nonetheless, as a beneficiary of the BDT, enjoy the income and other economic benefits of the business interest. The BDT can also own life insurance on the life of the child. When so used, the BDT, especially one funded with income-producing assets, can avoid some of the disadvantages associated with the typical irrevocable life insurance trust. These disadvantages include the need to use Crummey withdrawal powers to shield insurance premium payments from gift tax.
- Subjects
UNITED States; BENEFICIARIES; TRUSTS &; trustees; LIFE insurance trusts; CRUMMEY trusts; ASSETS (Accounting); INTERNAL revenue law
- Publication
Journal of Financial Service Professionals, 2012, Vol 66, Issue 5, p47
- ISSN
1537-1816
- Publication type
Article