An irrevocable life insurance trust (ILIT) is a type of trust designed to hold a life insurance policy. The purpose of an ILIT is to allow a grantor to transfer life insurance policy death benefit proceeds to their named beneficiaries tax-free. ILIT’s also allow grantors to hold their life insurance policies outside of their estates, reducing their total calculated estate tax, which can also help grantors in their eligibility for government benefits such as Medicaid to cover long term care costs.

ILIT’s have some unique stipulations, including as long as the life insurance policy is owned by an ILIT for at least three years before your death, the proceeds in the ILIT will not be included in your taxable estate. A grantor can fund an ILIT by paying their annual life insurance premiums and gifts of up to $15,000 per named beneficiary of the ILIT trust, per year.

Irrevocable life insurance trusts (ILITs) are effective tax planning tools that also protect trust assets against lawsuits, and creditors. However, ILITs are not without limitations. They are irrevocable, meaning that once they are established, they cannot be changed, which includes changing named beneficiaries.

Like all trusts, ILITs have nuanced rules, it is crucial to work with an experienced estate planning attorney and corporate trust management company like Altruist^™ to see if an ILIT is right for your situation, and ensure it is set up and managed correctly.

Expert Trust Management to Ensure Your Wishes Are Realized

Altruist’s^™ trust managers have extensive experience managing ILITs. From the development of your personalized irrevocable life trust to the ongoing administration, we’ll be there to provide guidance every step of the way. Your dedicated Altruist^™ trust manager is just a phone call away whenever you have questions or need support.