Carrie created an irrevocable life insurance trust to hold a $1 million cash value life insurance policy five years ago. She transferred ownership of the policy to the trust, although she remained the insured. The trust is the insurance beneficiary, and trust beneficiaries have been granted Crummey Withdrawal powers under the trust agreement. Carrie intends to fund the trust on an ongoing basis by transferring cash to the trust to meet the annual premium payments. The ILIT trustee will then use the cash to pay the life insurance premiums. What tax consequences are there for Carrie?

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: She will be responsible for paying income taxes on any dividends paid by the life insurance policy.

Because of the timing of the transfer of ownership, the value of the life insurance policy will be included in her gross estate if she were to die today.

The face value of the policy will be excluded from her gross estate, but the cash value of the policy will be taxed as a capital gain asset at her death.

The transfers used to pay premiums will constitute adjusted taxable gifts to the extent the transfers exceed the annual gift tax exclusion.