1-yes you can open trust for grand daughter
2-the cash value would be considered a gift and 709 tax return must be filed.
3-you can use your lifetime exemption on 709 instead of paying tax.
4-transferring life insurance is subject to a three year look back period for estate tax purposes
The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.
you should sit with an estate planning expert. there are several vehicles that could assist you in establishing transfers to grandchildren that you and your spouse may employ. without knowledge of the extent of your assets and the beneficiaries you wish to provide for and the amounts giving you advice could result in greater taxes not less. speak with a lawyer that understands the complexities of your assets, tax concerns and how to take advantage of generations skipping trusts, crummey trusts other estate planning tools including irrevocable insurance trusts.
without a detailed review by a lawyer can all the issues raised in your question be appropriately addressed...nothing in this response should be construed as establishing a lawyer client relationship..the answers herein are for informational purposes and not to be construed as advice
You need to see an estate planning attorney. Revocable trusts will not remove assets from a taxable estate. If you are talking about GST implications and GST trusts you must see an estates attorney who knows about this area of tax law.
As for the life insurance, an irrevocable trust needs to be drafted with certain key provisions and needs to be operated in certain ways to exclude life insurance from the taxable estate. Additionally, there is a 3 year rule involved where current life insurance is being transferred.
There are other implications that also need to be explored with an estates attorney.
Do not even attempt to do this on your own. For the reasons why please read my legal guide entitled Estate Planning Mistakes: 5 Not So Easy Pieces at http://www.sjfpc.com/estate_planning_drafting_wills_trusts.html. After you read this you may gain an understanding of what is involved in this process. Be sure to hit the like button at the end of this article if you found it helpful.
Hope this helps.
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You are confusing the generation skipping transfer tax with the estate tax. It is the estate tax that has a $5,120,000 exclusion, for this year. If Congress does not do anything before then, the exclusion from estate tax will be $1,000,000 as of January 1, 2013.
If properly set up, an irrevocable life insurance trust can shelter assets from estate tax and/or provide an easier way to pay any tax that applies. This is more complicated estate planning and should only be contemplated with the advice of a skilled estate planning attorney. You should find one, because it is clear that you have significant resources and options available to you.
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