Policies using the MPI® Strategy are phenomenal at creating wealth. Unfortunately, if your assets exceed the Federal Estate Tax exemption amount, your estate will be assessed an estate tax. In other words, the fair market value of your home, cash, securities, retirement plans, vehicles, business interests, real estate, personal property, everything you own – including your policy – will be included in your federal taxable estate.
The Federal Estate tax rate is currently 40%. (It was 55% in 2001. Some states also charge an estate and inheritance tax too. Hawaii and Washington, the highest, currently have a 20% estate tax rate.) In 2025, the Federal Estate Tax exemption is $13.99 million per person or a combined $27.98 million for married couples. This means that currently a single person’s estate will be taxed at the Federal Estate tax rate of 40% on everything exceeding $13.99 million. ($27.98 million per couple.) However, the Federal Estate Tax exemption amount can vary.
The Federal Estate Tax exemption amount is schedule to increase to $15 million, adjusted for inflation, per person in 2026. Currently the Federal Estate Tax exemption amount is the same as the Lifetime Gift Tax Exemption amount. However, it is also important to know that currently gift tax exemption is the same as the Federal Estate Tax exemption. Previous proposals have sought to lower the Lifetime Gift Tax Exemption amount to $1 million. This is important because if you already own policy using the MPI® Strategy and gift it into a MPI ILIT Legacy Trust, you are using up part of this $1 million gift exemption rather than the current $13.99 million, in 2025, Lifetime Gift Tax Exemption amount.)
In 2001, the Federal Estate Tax exemption amount was $675,000 and was only $1.5 million as recently as 2005. Policyowners using the MPI® Strategy seeking to reduce their federal estate tax to the greatest extent possible have their policy owned by a MPI ILIT Legacy Trust at the outset. Such a strategy not only removes the initial investment out of their taxable federal estate, but also all future investments and policy’s growth. The result can mean millions saved in federal estate taxes. If you already own a policy, it is not too late. You can gift the policy into a MPI ILIT Legacy Trust to begin enjoying the benefits as soon as possible. The longer you wait, the more of the Federal gift tax exemption you will consume because the value of your policies will only continue to grow.
Mr. Woodruff typically charges $6,000 for an ILIT (an irrevocable life insurance trust). policyowners using the MPI® Strategy pay $4,000 and this price.
However, be aware that there are some constraints with an ILIT that may not make it a viable option for all MPI® Strategy owners. Further, the MPI ILIT Legacy Trust is irrevocable, meaning it typically cannot be changed later. Therefore, during your consultation with Mr. Woodruff, he will help ensure that a MPI ILIT Legacy Trust is right for you.
*Nothing herein should be considered tax advice. You should seek independent tax counsel regarding your own taxable estate and situation.