Why San Diego Gas & Electric Workers Should Value Life Insurance and Trusts

San Diego Gas & Electric employees should consider estate planning with Irrevocable Life Insurance Trusts (ILITs) to protect their assets and provide liquidity for their heirs to help preserve their financial legacy, says (Advisor Name) of The Retirement Group, a division of Wealth Enhancement Group.

With changing tax laws and rising estate tax concerns, San Diego Gas & Electric employees can use an ILIT to shield their wealth from unnecessary taxes so their heirs get the full benefit of their life insurance benefits, advises (Advisor Name) of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

1. Irrevocable Life Insurance Trusts - Their role in estate planning and tax management.

2. Key Benefits and Strategic Advantages - Understanding how ILITs provide liquidity, protect assets, and provide financial security for heirs.

3. Implementation and Tax Considerations - establishing an ILIT, tax implications, choosing the right trustee and insurance policy.

The only certainties in financial matters are death and taxes. You cannot avoid mortality, but you can manage taxes—especially in estate planning—accordingly. Everybody needs an estate plan—a will and a healthcare directive. For those with substantial wealth, however, anticipating future state and federal estate taxes requires more sophisticated strategies, like an irrevocable life insurance trust (ILIT).

An ILIT gives San Diego Gas & Electric employees many advantages—it provides liquidity to pay estate taxes and other costs and flexibility to your heirs. Consider the benefits and operation principles of an ILIT for San Diego Gas & Electric employees with substantial assets.

The Power of ILITs: Providing Liquidity and Flexibility

Estate taxes can be a big expense for your successors—and may require the sale of real estate or family businesses to raise cash. Using an ILIT can avoid such an administrative hurdle and possibly even the loss of valuable assets.

Most important in forming an ILIT is giving your heirs the flexibility to settle your estate. Your successors may cover estate taxes, debts, and other expenses without selling illiquid assets if they have life insurance policies in the trust. This not only protects their inheritance but also means they will be able to carry out your wishes and keep your possessions.

Assets held by the trust are not considered part of the estate for federal inheritance/estate tax purposes, which is one major advantage of an ILIT over individual life insurance policy ownership. This means your successors will pay no estate or inheritance taxes on the proceeds of your life insurance policy.

Who Needs an ILIT?

An ILIT is especially useful for:

• They predict that their estate will be over the federal and/or state tax exemption limits.Anticipate that their successors will need cash from a non-liquid estate to pay taxes.Want to manage and secure an inheritance for minors, special-needs individuals, or those without financial experience.They want to avoid probate and keep their estate confidential.The intent is to shield insurance benefits from divorce, creditors, or other legal action against them or their beneficiaries.

Estate Strategies to Consider: A Changing Landscape

The 2017 Tax Cuts and Jobs Act lifted the federal estate tax exclusion to USD 12.92 million per individual or USD 25.84 million for a married couple using portability. While this historically high exclusion amount may lead some to question the need for an ILIT, tax laws are always changing. The federal estate tax exclusions will not stay where they are now. State estate tax exclusions may also be less, so there may be state estate tax liabilities even if federal taxes are escaped.

An ILIT can provide a number of tax benefits but should not be formed lightly. This is an expensive legal arrangement that requires the services of a lawyer and is complicated to set up and maintain. It is an irrevocable trust, meaning the grantor cannot generally revoke or amend its terms without complying with state law and trust provisions once it is established. For any state or federal estate taxes that may be applicable to your estate, you should speak with a tax advisor or estate planning attorney about an ILIT.

How an ILIT Works: Providing for Future Generations

The grantor purchases a policy of life insurance through an irrevocable trust, called an ILIT. For couples, typically a survivorship or second-to-die policy is selected, with the death benefit payable upon the death of the surviving spouse.

When the grantor or surviving spouse dies, the insurance proceeds are deposited into the ILIT and distributed to trust beneficiaries—usually children, grandchildren, or other relatives. The manner of distribution depends on the trust structure, which may allow beneficiaries to access the funds shortly after the insured dies or distribute the assets gradually over time.

Making Gifts Count: Premium Payments and Tax Considerations

The premium payments on ILIT policies are usually funded through gifts from the grantor. Any available annual exclusions from the federal gift tax are usually limited to beneficiaries withdrawing up to the annual exclusion amount (USD 17,000 in 2023 per grantor, per beneficiary) on their portion of the gift within a short time frame following a gift. Optimal use of this strategy requires that beneficiaries understand the estate planning objectives and consequences of withdrawing gifts.

How to Choose the Right Insurance and Trustee

Both term-life and permanent-insurance options, such as whole life and universal life, are available for the ILIT's life insurance. Since the ILIT is designed to pass wealth to heirs only if the policy is in force at death, many San Diego Gas & Electric employees purchase permanent life insurance. Permanent plans offer coverage for life with a guaranteed death benefit, while term policies are age-limited.

When setting up an ILIT, research the financial strength of the life insurance company issuing the policy. Selecting a company with low premiums and high credit ratings offers peace of mind long-term. And a good trustee will help an ILIT run smoothly and responsibly.

Conclusion: Secure Your Wealth & Legacy

In conclusion, an Irrevocable Life Insurance Trust can be a valuable tool to protect your wealth, provide liquidity for your estate, and preserve your legacy as you wish. A constantly changing financial landscape means you need to protect your assets and provide for future generations. Work with estate planning attorneys and tax advisors to explore an ILIT tailored to your situation. And adding an ILIT to your estate plan might provide peace of mind and protection for your loved ones—whether you are approaching or are already retired.

In a 2023 AARP survey, 75% of Americans over age 60 worry that they will leave their relatives with a financial burden because of estate taxes and other expenses. An ILIT may be the best way to address these concerns. Including an ILIT in your estate plan gives your heirs the flexibility to resolve your estate and get cash without selling assets. It is a tax-savvy strategy that leaves the life insurance death benefits exempt from estate tax and easily transferred to your beneficiaries—protecting your legacy and securing your family's financial future.

See How Irrevocable Life Insurance Trusts Can Protect Your Wealth & Your Legacy. Learn how ILITs could help San Diego Gas & Electric workers approaching retirement age and active retirees manage estate taxes. With the highest federal estate tax rate set to hit 40% in 2023, an ILIT could allow flexibility for heirs without having to fork over prized assets to pay taxes. Your trust assets are excluded from your estate for tax purposes, so your beneficiaries will not owe estate or inheritance taxes on life insurance death benefits. ILITs provide liquidity that protects insurance benefits from divorce, creditors, and legal actions. Crafted to protect your wealth and protect your financial future.

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A properly drafted irrevocable life insurance trust is like a financial structure built to last. An ILIT protects your wealth and loved ones from estate taxation and forced asset sales just as a fortress defends valuables from outside threats. Imagine it as an invisible shield preventing estate taxes from affecting your beneficiaries as your life insurance benefits are transferred to them. Permanence and tax advantages protect your family's financial future with an ILIT—leave a legacy of security and wealth.

Added Fact:

In a 2023 study by WealthManagement.com, many San Diego Gas & Electric workers over age 60 still do not understand the potential benefits of Irrevocable Life Insurance Trusts (ILITs) in estate planning. A whopping 40% of respondents did not know that ILITs could be used to protect their wealth and legacy. That highlights the need to educate San Diego Gas & Electric workers about ILITs—especially with rising estate tax rates. Learning about the benefits of ILITs will help such people secure their financial futures and provide for their families without paying excessive estate taxes.

Added Analogy:

Making a financial legacy is like constructing a strong fortress for your family. As a fortified castle protects its treasures from outside dangers, so an Irrevocable Life Insurance Trust (ILIT) is a shield against estate tax burdens. Imagine your riches and your legacy as castle treasures. Your ILIT is like an enormous fortress, keeping your assets safe and ensuring they reach your heirs intact. This fortress is essential—especially with rising estate tax rates. Understanding ILITs can help San Diego Gas & Electric workers build this financial security for generations to come.

Sources:

1. Rosen, Richard. '7 Reasons for an Irrevocable Life Insurance Trust (ILIT).'  Investopedia , 24 Oct. 2024. https://www.investopedia.com/articles/personal-finance/092315/7-reasons-own-life-insurance-irrevocable-trust.asp

2. Garza, Luis. 'How ILITs Help High Net Worth Families.'  Garza Law Firm , Feb. 2025. https://lgarzalaw.com/how-ilits-help-high-net-worth-families

3. 'Irrevocable Life Insurance Trusts: Estate Planning Options.'  Bogart Wealth , Sept. 2024. https://bogartwealth.com/irrevocable-life-insurance-trust-ilit

4. 'What Is an Irrevocable Life Insurance Trust (ILIT)?'  Northwestern Mutual , Dec. 2023. https://www.northwesternmutual.com/life-and-money/what-is-an-irrevocable-life-insurance-trust

5. 'Can an ILIT Help Your Clients Prepare for the 2025 Estate Tax Sunset?'  Life Insurance Trust Company , Mar. 2024. https://lifeinsurancetrustco.com/can-an-ilit-help-your-clients-prepare-for-the-2025-estate-tax-sunset