Irrevocable Life Insurance Trust
Daniel Tan | November 24, 2022 | 0 Comments

What You Need To Know About Irrevocable Life Insurance Trust

In many well-crafted estate plans, Irrevocable Life Insurance Trusts (ILITs) could play a significant role in wealth transfer. They are efficient planning tools. Moreover, they provide your family with a wide range of potential benefits.

Irrevocable Life Insurance Trusts

Irrevocable life insurance trusts (ILITs) can be used by estate planners to manage life insurance policies and distribute policy proceeds. Due to the substantial savings they provide in transfer taxes, ILITs are particularly popular.

When an insured person dies, the payout from a life insurance policy is subject to estate tax. In contrast to the insured, an ILIT is the owner and beneficiary of a life insurance policy.

An ILIT has a lot more advantages than just the potential to provide a death benefit that is exempt from taxes. Protecting your insurance payments from divorce, financial difficulties, and legal action against you and your beneficiaries is all part of this. Additionally, an ILIT prevents probate, shielding assets from probate-related expenses and privacy compromises.

If you are interested in creating an Irrevocable Life Insurance Trust, you will need an experienced guide to do so. For example, Keystone Law Firm deals with life insurance as one of the estate planning tools. Find out more about celebrities’ life insurance as you read through this article.

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Gifting And Trusts

Gifting issues may also arise if the policy being transferred has a significant amount of accrued cash value. If there is any doubt regarding the grantor’s capacity to acquire coverage, you might want to verify insurability. Before spending the money to create a trust, have the grantor apply for coverage. Make sure to include the owner as a trust to be designated.

Once the life insurance company offers to replace the original application with a new one that correctly names the trust as the owner, the policy will be given to the trust. An estate planning attorney in Chandler AZ can guide you all throughout the process so you won’t have to worry about anything.

Structure Of The Irrevocable Life Insurance

The trust only includes one or more life insurance policies. Then the insured typically makes annual contributions to the trust in an amount sufficient to cover the insured’s lifetime premiums. The insurance company transfers the policy’s profits to the trust upon the insured’s death.

Following that, the trust administers the trust’s assets and distributes them in accordance with the terms of the trust agreement. As long as the trustee is permitted to do so by the terms of the trust agreement, the trustee may lend the insured’s estate money. They may also use the money to purchase the insured’s estate assets if the insured’s estate requires cash. Find out more about the benefits of an ILIT as you read on through this article.

Benefits Of An ILIT

An ILIT can prevent your insurance death benefit from being used against you when calculating your federal estate tax, which is one advantage. Additionally, an ILIT grants you the authority to specify in the trust instrument how, when, and who will receive the death benefit. An estate planning attorney can be helpful in these types of situations. Give Keystone Law Firm a call for a free case evaluation, and visit their website for more information.

You should also be aware of a few drawbacks of working with an ILIT. One of them is that the grantor of this type of trust must give up all rights to the trust’s assets. This includes the identity of the beneficiaries and the conditions under which they are entitled to the assets.

What Does A Trustee Do?

In order to keep the policy in effect, the trustee may be a friend, a relative, or a qualified independent trustee. They coordinate the payment of premiums with the insurance company. The insurance policy’s death benefit goes directly to your trust upon your death, where it is distributed to the trust’s beneficiaries.

The fact that an ILIT can provide beneficiaries with quick liquidity and that the proceeds are tax-free are its primary advantages. Any excess value above those limits is typically shielded from the grantor and beneficiary’s creditors when an insurance policy is held in an ILIT. Curious about estate planning attorneys? There’s always Keystone Law Firm in Chandler AZ to provide solutions for you and your needs.

Looking For A Lawyer

How much of an insurance policy’s cash value or death benefit can be protected from creditors is governed by state law. You may consult with Keystone Law Firm in Chandler AZ for more information. This could be very helpful if you or your beneficiaries work in a field where lawsuits are common.

Daniel Tan

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