Reply #2: a trust containing Life Insurance policies

[DrDan]

you make a "gift" to the trust to pay the policy premiums. When you pass away, the benficiary gets the life insurance - but it is not a part of an estate - hence escapes the estate taxes.

So for example - if you and spouse have two children - a gift up to $52,000 could be made to the trust (each parent gifting $13K to each child) with no tax implications. That could be used to pay the premiums on a lot of insurance for the two children. The $52K comes out of the estate - and the amount paid from the life insurance upon death is not part of the estate. I could be used to transfer say a million to children without having that million being considered a part of an estate.