What is a Permanent Life Coverage Trust and how does it operate?

There is a common misconception that life insurance profits are not subject to estate tax. While the profits are obtained by your loved ones without any income taxes, they are included as part of your taxable estate and as a result your loved ones may forfeit more than forty percent of its worth to federal estate taxes. A Permanent Life Coverage Trust keeps the death benefits of your life insurance policy separate from your estate, so they are exempt from estate taxes. There are various choices available when establishing a PLCT. For instance, PLCTs can be structured to provide income to a surviving spouse with the remaining amount going to your children from a previous marriage. You can also establish provisions for gradual distribution of a limited fraction of the insurance proceeds to a financially irresponsible child over a specified period.