Irrevocable life insurance trusts

An ILIT (Irrevocable Life Insurance Trust) is a specialized type of trust designed to hold life insurance policies outside of the insured individual's estate, thereby reducing estate taxes.

Benefits:

Estate Tax Reduction:

Life insurance proceeds held within an ILIT are not considered part of the insured's estate for tax purposes, potentially reducing estate taxes upon the insured's death.

Asset Protection:

Assets within an ILIT are protected from creditors' claims because the trust technically owns the life insurance policy, not the insured or their estate.

Privacy:

Since life insurance proceeds held in an ILIT bypass probate, distribution is private and not subject to public record, maintaining confidentiality for beneficiaries.

Control:

The ILIT allows the grantor (person creating the trust) to dictate how the life insurance proceeds are distributed among beneficiaries, ensuring the money is used according to their wishes.

Flexibility:

ILITs can be structured to accommodate changing circumstances, providing flexibility in the distribution of assets and adapting to evolving family needs or tax laws.

Asset Management:

ILITs can include provisions for professional management of life insurance proceeds, ensuring optimal growth and distribution according to the trust's objectives.

Wealth Preservation:

By efficiently transferring life insurance proceeds to beneficiaries, ILITs help preserve family wealth for future generations, providing financial security and support.