Self Settled Life Insurance: A Viable Alternative?

Section 2036(a)(1):

• Assets gifted by Decedent (in trust or otherwise) but Decedent retained for life:
  • “The right to the income from”; or  “The possession or enjoyment of” such assets
  • If so, the assets are included in Decedent’s Gross Estate

Section 2036(a)(1):

• In a self-settled trust, the client/settlor does not retain the right to income (or principal)
• Does the client/settlor retain “possession or enjoyment of” the trust assets for life?

Section 2038:

• If the Settlor of a trust retains the right to alter, amend, revoke or terminate the trust at death, the assets will be includible in the Settlor’s Gross Estate.
• BUT, in the properly designed self-settled trust, the Settlor does not retain any such powers.