What Is an ILIT or Irrevocable Life Insurance Trust?
Law and especially estate planning law are full of abbreviations. ILIT is one of those abbreviations that might be important to helping you achieve your estate planning objectives. In this article, Attorney Philip Hundl talks about an ILIT in answering this common client question. If you want to learn more about options to meet your estate planning goals, please call us at 800-929-1725 for an appointment at our Wharton, El Campo or Richmond offices.
Question: What is an ILIT? I have heard this term used in estate planning. Please explain an ILIT?
Attorney Philip Hundl’s Answer: An ILIT refers to an Irrevocable Life Insurance Trust. An irrevocable life insurance trust is a trust that the grantor creates during his or her lifetime. It completely gives up all rights in the property (life insurance) that the grantor transfers to the trust, and retains no rights to revoke, terminate or modify the trust in any material way.
How Are ILITs Used?
You can use ILITs to accomplish several estate planning objectives. Meeting the liquidity/cash needs of the grantor’s estate might be an objective. Avoiding the estate taxes on the policy’s death benefit proceeds could be another objective. Other objectives of the ILIT might be providing additional income to grantor’s survivors (beneficiaries of the trust) after estate taxes and expenses have been paid, and protecting assets from possible creditors at death. The grantor’s spouse, children or grandchildren are often the beneficiaries of an irrevocable life insurance trust.
The irrevocable life insurance trust, through the trustee, is the owner of the life insurance policy. It’s important to note that he grantor cannot be the trustee. The trust must meet certain requirements to properly own life insurance and qualify as an ILIT.
So if you’re interested in using an ILIT in your estate planning, you should contact a knowledgeable estate planning attorney and financial planner.
If You’re Interested in an Irrevocable Life Insurance Trust
So if you’re interested in an irrevocable life insurance trust, we can help you with this type of trust and more complex estate planning strategies or something as simple as a basic estate plan. Our attorneys meet clients at our offices in Wharton, El Campo and Richmond, Texas. Call us at 800-929-1725 to schedule an appointment.