What is a Wealth Replacement Trust and how can it help my estate planning?

A Wealth Replacement Trust is an Irrevocable Life Insurance Trust that works in tandem with a Charitable Remainder Trust to replace wealth transferred to the charity, which allows you to maximize your charitable deduction with no reduction in the wealth you transfer to the next generation of your family, while incurring no income or estate tax on the life insurance proceeds. The Grantor(s) (You and/or your spouse) can pay the life insurance premium of the life insurance held in the Wealth Replacement Trust by using a portion of your retained annuity from the charitable remainder trust, and/or a portion of the tax savings from the charitable income tax deduction from the transfer of assets to the charitable remainder trust, and/or making annual exclusion gifts to the Wealth Replacement Trust. In the end, the Wealth Replacement Trust will allow you to take a highly appreciated asset (ex. Stock) and sell that highly appreciated asset inside a charitable trust without incurring income (capital gain) tax, provide you with an income stream from the charitable remainder trust, without reducing the wealth transferred to your intended beneficiaries (ex. Children).

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