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For more details on WHY the life insurance lobbies aggressively to support the estate tax, see this link from ramanujan's article:

http://www.nodeathtax.org/uploads/view/2313/life_insurance_b...

Excerpt:

"Life insurance is the most basic tool for estate planning. Put simply, inheritance is subject to the estate tax, while life insurance benefits are untaxed. This drives up the demand for life insurance, thus driving up the price. The disparate tax treatment distorts the market so much that a wealthy person could buy a policy knowing he will pay more in premiums than the value of the benefit – and it would still make sense financially.

For example, if someone bought a $20 million whole life policy at age 60, and paid $25 million over the years in premiums, he would still be giving more to heirs (an untaxed $20 million) than if he just bequeathed that $25 million to his children – because after the estate tax, that could be worth less than $20 million."

--This discussion has been really informative. Thanks to all.




Is there anything to stop a person from investing their estate in a company whose sole purpose is to insure their life?


If it hasn't already been tried, the IRS would tie it up in litigation for so long that the principal would be consumed by legal fees.




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