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To paraphrase Mark Twain, the collapse of the American economy has been greatly exaggerated. A few — very few readers of this column — are enjoying increased sales and profits. Most are flat or down a bit. An alarming number — though small — are bleeding red ink.

Suddenly, “time to plan my estate,” or “I want to get my affairs in order,” or similar statements have a ring of urgency. A let’s-get-it-done attitude has replaced procrastination.

I have been pounding on the “tax-free environment door” for years as the best way to beat up the IRS… legally. There are two tax-free environments: charitable trusts and life insurance. For most readers life insurance is the easiest way to go.

But recent phone calls — since the economic downturn — have pinpointed two specific problems concerning life insurance: (1) “I’m having trouble paying my insurance premiums on my existing policies”; and (2) “I need (or sometimes “want”) $1 million (or more) of insurance, but can’t afford the premiums. ”

I could write a small book that tells you the endless combination of ways to solve this problem. Instead, we are going to tackle this insurance problem task in two separate articles. Today, we will cover the strategies we use most often when your problem deals with existing insurance. Next week’s column will cover strategies that help you pay for new insurance policies.

How to solve the problem of substantially reducing your annual cost of list insurance premiums, while keeping your death benefits the same (or even increasing the benefits, if needed)? Actually, it’s easy when you know how to do it.

Following are the four strategies we use most often. (Note: There are many other strategies and endless combinations that we use, depending on your age, health or special circumstances).

1. Financed insurance. This is a relatively new strategy, where you use the cash surrender value of your existing policies as collateral to finance reduced future annual premium payments. The bank is willing to wait until you go to heaven to be paid back the loan. For example, in a recent case, a couple increased their death benefit from $2 million to $2. 8 million, while cutting their premium by 48 percent.

2. Wrong type of insurance. About one-third of the cases we look at have single coverage (the policy only covers the husband Joe). Yet, it becomes clear as Joe’s estate plan is developed, that second-to-die (insuring Joe and his wife Mary) is what is needed. In a real-Joe-and-Mary case (both were 60 years old), we reduced the premium from $33,412 to $22,338. The old-single coverage on Joe was only $2 million. The second-to-die policy on Joe and Mary raised the coverage to $2. 6 million. And, oh yes, Joe pockets $201,000 (the cash surrender value on the old policy) all tax free.

3. You have substantial funds (say $300,000 or more) in one or more qualified plans (profit-sharing, 401(k), IRA or similar plans). Create a subtrust to carry your required insurance. You no longer pay any premiums. Your qualified plan pays 100 percent of all future premiums. No income taxes are owned when the premiums are paid, and the death benefits are also totally tax-free.

If you are married, a subtrust is your insurance/tax dream come true. For example, Joe age 68 and his wife Mary (age 66) used a subtrust to turn $515,000 in an 401(k) plan into $1. 8 million in second-to-die coverage. Every dime of that $1. 8 million will go to their kids, tax-free (no income tax, no estate tax).

Stop! I’m not kidding. If you are married and have a total of $300,000 or more in your IRA, profit-sharing plan (or other) qualified plans, take action now: Check out a subtrust. Bet you and your spouse will both be happy tax campers.

4. Combinations. We use two or all three of the above (and other) strategies, as necessary, to accomplish your insurance and estate planning goals.

Two cautions: (1) No matter which of the strategies you decide are best for you, make sure that all death benefits will be estate tax free. (2) Only work with experienced and knowledgeable professionals.

To help readers of this column join the tax-saving fun, I have arranged to have your current insurance policies analyzed (no charge or obligation). Fax your name, address and phone number (along with a list of your policies) to 847-674-5299. Call Irv 239-417-9732 if you have any questions.

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Irv Blackman, CPA and lawyer, is a retired founding partner of Blackman Kallick Bartelstein, LLP (CPAs) and Chairman Emeritus of the New Century Bank (both in Chicago). Contact Irv at 847-674-5295 or blackman@estatetaxsecrets.com. Web site www.taxsecretsofthewealthy.com.