An irrevocable life insurance trust (ILIT) is a trust that is the owner and beneficiary of one or more life insurance policies. The benefits of this type of trust include positive tax benefits and control of distributions to beneficiaries pursuant to terms of a trust as opposed to life insurance outside a trust that distributes outright to beneficiaries. The proceeds of a policy acquired in a life insurance trust are not taxable in a person’s estate. This is an ideal type of trust for people who will not need to access the cash value of life insurance policies during their lifetimes and/or may be close to the basic exclusion limits.
An important caveat to this type of trust that can doom the whole exercise if done incorrectly is that the owner/insured that created the trust cannot retain any ownership interest over the trust, including acting as trustee, the power to change the trustees or the beneficiaries.
If an ILIT is the right tool for you, we can help you draft, fund and maintain this trust correctly. Contact us online or by phone 310-517-8600 . Based in Torrance, our lawyers serve clients throughout Southern California.