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When you buy life insurance you buy them in the enjoyment of your family to pass away. Why would you like to destroy that the financial benefits for those who you love, in life traps? You do not - even when at least not aware ...

Here are the two types of life insurance mistakes can hurt your loved ones:

1. Reduce the amount disbursed.
2. Let your family because of the IRS Estate Tax.

The IRS And Your Life

The fact is that we all pay our fair share of taxes you do not want to burden your family with a frighteningly large tax bill in the same year they are grieving your loss.

Life Insurance Trap # 1 the conclusion of a policy in itself. The fact is, you want coverage for your family if you are away, but the owners of insurance itself can lead to insurance proceeds be subjected to inheritance tax at rates of up to 55%. The reason is that the payment of life insurance is a comb in your entire property, and thus you are taxed on the entire amount of the taxable estate - which now includes that a relatively large insurance payout.

Estate Planning Secret To avoid this trap

Are you the person, the recipient (eg spouse) Remove the policy for you.

Create a life insurance trust to the policy and distribute the funds per your written instructions (will).

You can still finance the premiums on the policy by providing gifts to the policy owner (beneficiary or trust), with the annual gift tax exclusion to protect the gifts from tax.

Life Insurance Trap # 2 capital. Sometimes a cash crisis will come and the thoughts will enter your mind to cash in your policy. Sure will give you a quick influx of cash but it will also lead to a "chargeable event", which means that you must pay to 15 April,.

Estate Planning Secret To avoid this trap

Take advantage of the annual gift tax exclusion. This exclusion allows you to $ 10,000 per person tax free. Or $ 20,000 to a partner in a legal marriage. Whatever you want to contact your tax professional before you make a withdrawal.

Life Insurance Trap # 3 The three-person insurance Trap. This case is a bit convoluted to follow, but it happens so much attention.

The three-person case is when a person, a policy to another (for example, a spouse), and then draws the recipient to another person (eg a child).

This is a tax case where the payment of benefits to the beneficiary (child in our example is as a taxable gift by the policy owner, even if the policy was adopted by the spouses.

Estate Planning Secret To avoid this trap

This is an easy to overcome. Simply remove the receiver "" own "the life. Or better yet, a life insurance trust own the policy.

Life Insurance Trust Warning: Always keep your life insurance trust created by a professional who specializes in trusts. A trust or cheap "generic" "Confidence is often poorly designed and fall apart when the IRS comes snooping around.

The Mother Lode of life insurance to avoid traps and estate planning secrets critical to your cash and peace of mind.

If you need to learn more about life insurance traps and the different types of life insurance and then click the http://affordable-term-life-insurance.info a popular site for information on the insurance of the Consumer .