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Estate Liquidity · Trusts · Concentrated Wealth
The estate has plenty of value. The tax bill wants cash.
High-net-worth estates in Michigan share a shape: a business, real estate, retirement accounts — wealth that is real but illiquid. Estate settlement doesn’t take shares of the family company; it takes cash, on a deadline. Families without a liquidity plan sell assets fast and cheap to pay for the privilege of inheriting them.
Life insurance is the asset class built for that moment: an income-tax-free death benefit (IRC §101(a)) that arrives precisely at settlement, owned in a structure — usually an irrevocable trust — that keeps it outside the taxable estate. For estates approaching the federal exemption, it is the cleanest liquidity tool available.
The ILIT, done early
An Irrevocable Life Insurance Trust owns the policy and receives the death benefit outside your taxable estate — but transfers of existing policies fight the three-year rule (IRC §2035): die within three years of the transfer and the proceeds come back into the estate. The clean version is the trust buying coverage from day one. Early beats clever.
The SLAT window
A Spousal Lifetime Access Trust moves assets — often a cash-value policy — outside the estate while the household keeps practical access through the beneficiary spouse. It’s the workhorse for using today’s historically high exemption before any future law change, with living access the pure ILIT gives up.
Concentrated positions, insured
When the estate is one company or one building, heirs inherit a position, not a portfolio. A properly-sized death benefit is the diversification the estate never did: cash that lets heirs keep the asset, buy out siblings, or sell slowly at real value instead of quickly at fire-sale value.
Asked Across the Desk
High-Net-Worth Planning — the honest answers.
Often, yes — for three reasons. Exemptions are set by Congress and have been cut before; planning done at today’s levels is grandfathered in ways deathbed planning never is. Illiquidity is a problem at every size: a $6M estate that is 90% business still needs cash at settlement. And several states tax estates or inheritances at far lower thresholds than the federal line — if you own property in one, that state’s rules follow the property.
Personally-owned death benefits are income-tax-free to your beneficiaries (IRC §101(a)) but sit INSIDE your taxable estate — a $5M policy can create its own estate-tax problem. Trust-owned coverage keeps the proceeds outside the estate, protects them from beneficiaries’ creditors and divorces, and lets you script distribution — age gates, incentives, a special-needs structure. The cost is irrevocability: you’re giving the policy away. That’s why sizing and design come before signatures.
Both are irrevocable trusts that hold assets outside your estate. The ILIT is a dedicated insurance vehicle — maximum estate-tax efficiency, minimum flexibility. The SLAT names your spouse as beneficiary, so the household keeps indirect access to trust assets while you’re both alive — flexibility the ILIT gives up, with some added moving parts (divorce and simultaneous-death contingencies need drafting care). Married couples with meaningful estates frequently use both, for different layers.
Usually through annual-exclusion gifts to the trust paired with Crummey withdrawal notices to beneficiaries — the mechanism that turns premium contributions into present-interest gifts. Larger designs use lifetime-exemption gifts or installment arrangements. It’s paperwork with real deadlines, and it’s exactly the kind of thing that fails quietly when the trustee is an uncle with a day job. We coordinate the funding calendar with your attorney and CPA.
That’s the only way we work. CentraLife designs and places the insurance layer — the trust drafting is your attorney’s, the tax return is your CPA’s, and the three have to agree before anything is signed. If you don’t have that bench in Michigan, we’ll introduce you to professionals we work with regularly; the engagement and the loyalty stay yours.