As you work on your estate planning, you may want to consider an Irrevocable Life Insurance Trust (ILIT) for your beneficiaries. The trust can be funded one of two ways. The grantor can transfer a life insurance policy to the ILIT, or can pay for a policy that is bought by the trust for the beneficiaries named within. It's a trust that is funded when the grantor dies, and the proceeds from the life insurance are available. The trust is designed so that the grantor can name any beneficiaries they want to receive money from the trust once it contains money from the life insurance policy.

You Can't Revoke an Irrevocable Living Trust

An ILIT can't be revoked, which means that the person setting up the trust can't get the property back once it is named in the trust. The point of an irrevocable trust is to set up certain parameters and gain benefits that can only be met by making the trust irrevocable.

How an ILIT Helps Your Estate Planning Needs

When you have a large estate, an ILIT can accomplish a number of goals when it comes to estate planning. An ILIT generally helps your estate control taxes on any proceeds from the policy, and will give money directly to your heirs that you name in the trust. Taxation issues can become a problem when an estate is sizable and you want to leave your heirs as much of your money as possible.

Why Bother With an ILIT?

When you set up an irrevocable trust, you don't own it. This means that when the money from your life insurance policy goes into the trust, it is not included in the property of the estate. This is one way for you to avoid some estate taxes and leave more money to the heirs you have named.

How the money in the trust is given out can be as specific or as general as you wish. You can leave a set percentage of the trust to each heir to be divided equally upon your death. You can also set up the trust to pa for your funeral, or to cover other expenses so that your estate doesn't have to. You can even set up the trust to take care of any of your debts in the event you have any at the time of your debt.

Once any money is paid that you designate to cover certain costs, the rest of the money can be disbursed to your heirs. Talk with a company like Crummey Service for more information.

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