An Irrevocable Life Insurance Trust (ILIT) is a trust that cannot be rescinded, amended or modified post creation. (Of course if you stop paying the insurance premiums, the trust will self-destruct). These trusts are designed to own a life insurance policy.
Instead of directly owning an individual policy, ILIT’s offer several legal and financial advantages to heirs, including favorable tax treatment, asset protection and assurance that the benefits will be used in a manner consistent with the benefactor’s wishes.
In general, if the rules are followed, the trust assets will not be included in the gross estate of the insured. This differs from when a policy is owned individually.
You might not have a taxable estate, but the ILIT still may be of value to minimize irresponsible behavior and protect beneficiaries who are either minors or adults with histories of reckless spending habits, or patterns of alcohol/substance abuse. An appointed trustee can supervise the trust and distributions of the assets.
Our KRD professionals can assist you to work through the complexities of asset protection and estate planning. Contact us today to learn more.
