When my wife and I (both mid-30’s) had our wills drawn up a few years ago, our lawyer suggested placing our life insurance into an irrevocable trust to bypass estate taxes. Our current net worth is a bit over a million dollars and we have policies of $2 million and $1 million. We’re fine for federal taxes, but we live in WA and here the exemption is only $2 million with no portability. If we were both to die and our estate and life insurance were combined, then some of what is being passed on to our kids would definitely be subject to estate tax. We’re also expecting our net worth to grow over the years.
For various reasons, we’re planning to re-do my $2 million policy in the near future and this would be a good time to put it into a trust.
My understanding is that the major downsides of a trust are lack of control and the initial set up cost. I have legal insurance through work which, I believe, would cover the cost. The upsides are keeping our assets safe from estate taxes. Is there anything we’re missing here? Is the lack of control that big an issue?