Irrevocable Life Insurance Trusts
What is an Irrevocable Life Insurance Trust (ILIT)?
An Irrevocable life insurance trust (ILIT) is a trust that owns as its primary assets life insurance on the life of the Grantor. The ILIT is irrevocable and may not be modified.
There is a common misconception that life insurance proceeds are not subject to Federal Estate Taxes. While the proceeds are received by the beneficiaries free of any income taxes, the proceeds are countable as part of your taxable estate and therefore your family can lose about half of its value to estate taxes.
What Can an ILIT Do?
An Irrevocable Life Insurance Trust (ILIT) is created specifically for the purpose of owning your life insurance policy. A properly established and administered trust holds the life insurance policy outside of your estate and keeps the proceeds from being taxable to your estate. The proceeds from the insurance policy can then be used to provide your estate with the liquidity to pay estate taxes, pay off debts, pay final expenses and provide income to a surviving spouse or children.
The ILIT will be the policy owner and beneficiary. Once your trust is established, you use your annual gift tax exclusion to make cash gifts to your trust. Your beneficiaries forgo the present gift (in lieu of the future proceeds) and the trustee uses the remaining gift to pay the premium on the life insurance policy.
There are many options available when setting up an ILIT. For example, ILITs can be structured to provide income to a surviving spouse with the remainder going to your children from a previous marriage. You can also provide for distribution of a limited amount of the insurance proceeds over a period of time to a financially irresponsible child.
Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated estate plan.
For over forty years, our clients have relied on Thomas E. Raines, PC to help them make prudent business, financial, and personal decisions in connection with preparation of Irrevocable Life Insurance Trusts. If you need assistance in the area of preparation of Irrevocable Life Insurance Trusts, please contact our Atlanta Estate Planning Lawyer at Thomas E. Raines, PC immediately at 770-263-0093 or via email through the contact portion of this website by email.