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So when all of the estate tax and gifting laws shook out and got signed, two things really stood out. There were some very generous changes and, unless extended, they will only last two years. This could make for the largest two years transfer of wealth in history

There is an interesting twist in the life time maximum gifting level. While the annual gift per person stayed at $13,000, the same as it was when the lifetime max was $1,000,000, the new maximum went to a whopping $5,000,000. Who knows who will be in charge two years from now and if that level will be kept in place. but it seems obvious to me that it is economic stimulus at the core. Give the folks that have it a chance to gift huge amounts away against their maximum which allows it to be used elsewhere tax free.

In a fairly liquid estate this could open up the opportunity for an ILIT, Irrevocable Life Insurance Trust, to fund a substantial single premium life insurance policy by the insured gifting the single premium against their lifetime maximum. In cases where people have already gifted up to the old maximum of $1mm, it opens up an additional $4mm. Now I understand that this isn’t wahoo news to the majority of us, but there is no lack of estates out there that have been held back from doing the planning they want to by the $1,000,000 cap.

So, keeping in mind that single premium life insurance is going to buy more death benefit than any other mode, a liquid estate that can kick in a $2-$3 million dollar one time premium could potentially increase the size of the estate significantly without any estate tax burden. Few believe this window of opportunity will stay open forever. If Congress doesn’t act during the presidential election season in 2012, the law will revert back to a $1,000,000 exclusion and a 55% tax bracket. Even it does act most believe the exclusion will be reduced and the maximum bracket raised.

This opportunity should have anyone with sizable estates considering leveraging the power of the transfer by using those assets to fund Life Insurance outside their estate through third party ownership (ILIT). The power of this strategy shouldn’t be underestimated. At its’ maximum if a healthy couple age 50 in preferred health put all $5 million into a single premium 2nd to die policy, depending on the company, the policy would have a guaranteed death benefit between $34 million and $55 million. At age 60 it would generate wealth transfers of $28 million to $37 million. At age 70 it would generate non taxable estate value of $20 million to $24 million. Needless to say there is much to gained and much to be said for choosing the right company. At age 50 that premium can buy products that provide wealth transfers that spread over a $21 million dollar range.

In the case of single, widowed or divorced people, the power of wealth transfer is still huge. Using Lincoln Financial who is currently offering one of the hottest no lapse guarantee UL’s on the market I came up with the following single premium individual policy scenarios. Again assuming a $5 million single premium in a preferred rate class, a male age 50 could purchase a fully guaranteed universal life policy to transfer $31 million in wealth, a female $37 million. At age 60 a male could purchase $21 million and a female $25 million. At age 70 a male could buy $13 million and a female $16 million.

Bottom line. Any way you slice there is at least a temporary chance for huge wealth building and wealth transfer. If your goal is to protect and pass on your wealth to your family, then instead of waiting for the government to finally settle on a permanent estate tax and gift law, consider taking control of your estate planning. Blow off the politics and take action that protects your family and your wealth, guaranteed.