Leveraging Marriage

To leverage that money, Morrissey suggests buying life insurance inside the trust–a single-premium paid-up policy or ongoing premiums, depending on what kind of assets are in the trust. This is contingent on the insurability of the surviving spouse, but avoids the need for Crummey notices and avoids the gift tax as well. It can also reduce the trust’s tax bill.

To keep the surviving spouse’s assets from creating an estate problem, he says, advisors should make sure that the surviving spouse is not a full trustee. Otherwise those assets will revert back to the estate. If the trust is already established, advisors should also have it reviewed by an attorney to ensure it is allowed to purchase insurance.