An irrevocable life insurance trust (ILIT) controls how and when your assets will be distributed to your heirs, and creates tax efficiencies by positioning assets outside of your taxable estate. Talk with your financial advisor, legal and tax experts to structure your ILIT to help you achieve your families goals.
There are many types of trust that can provide financial advantages for you and your family. Some offer control of how and when your assets will be distributed to your heirs. Others create tax efficiencies by positioning assets outside of your taxable estate. An irrevocable life insurance trust can do both.
An ILIT, as it’s commonly called, takes your life insurance policies and moves them outside your estate and into a trust. Here’s how an ILIT works, and why it can benefit your family:
When you create an ILIT, you designate the trust as the beneficiary of your life insurance policies. The death benefit proceeds from your insurance will become property of the trust.
You determine in advance how those funds in the ILIT will be used. Typically, your spouse, your children, and the charities of your choice will be the recipients of the trust assets. You decide who receives the assets and when they will be dispersed.
You appoint a trustee to manage the ILIT and insure your wishes will be carried out according to your instructions. The cash inside the ILIT can provide immediate funds to your family: to pay your final expenses and estate taxes. Your heirs can avoid the need to liquidate family assets like real estate or business interest to cover those obligations.
ILIT assets will not increase your overall estate tax burden. The assets in the ILIT are held outside your estate, so there’s a reduced exposure to estate taxes, and the possibility of greater wealth transfer to future generations.
If you think an irrevocable life insurance trust would be of value to you, work with your financial advisor, legal, and tax experts. They can structure your ILIT to help achieve your family’s goals.
You’ve worked hard to create your wealth. You want to protect it so your family can enjoy the benefits of your success.