As stated in previous blog posts, there are many different trusts that can be used when creating an estate plan. One such trust is an Irrevocable Life Insurance Trust or an ILIT. The main benefit on an ILIT is to help avoid paying estate taxes
upon your death. Life insurance is an asset that is taxable as part of your estate at death. Whether it is taxable, however, depends on ownership of the policy and payment of the proceeds. An ILIT is a trust that is usually made for the benefit of another person and uses a life insurance policy to fund itself. An ILIT does not have an “owner” and therefore it does not become part of one’s estate upon death and is therefore not taxable in that estate. The main disadvantage of an ILIT, however, is that it
is “irrevocable” meaning that once it is created, it can never be changed. If your estate is large enough that paying estate taxes will be necessary, please call our office and we can discuss if an ILIT trust is good for you and your family.