An Irrevocable Life Insurance Trust (ILIT) can be an important tool for individuals in Bayside who want to manage life insurance proceeds outside of their taxable estate and provide for loved ones according to a clear plan. At the Law Offices of Robert P. Bergman, our focus is on practical estate planning solutions tailored to California law and the unique circumstances of Humboldt County residents. This guide explains what an ILIT is, how it works, and why people often consider this trust as part of a broader estate planning strategy that includes wills, trusts, and healthcare documents.
Deciding whether an ILIT is right for you involves reviewing your current assets, insurance policies, family situation, and long-term goals. Many clients come to us seeking to protect life insurance proceeds from estate tax exposure, to control distributions to beneficiaries, or to ensure funds are available for heirs while maintaining privacy. We provide straightforward explanations of trust funding, trustee responsibilities, and coordination with other estate planning documents like a pour-over will or power of attorney, helping clients make informed choices consistent with California rules and local court practices.
An ILIT offers a combination of estate planning advantages that many families find valuable. By placing a life insurance policy into an irrevocable trust, policy proceeds may avoid being included in an estate for tax purposes, which can reduce estate administration complexity. An ILIT also allows the grantor to set conditions for distributions, protect proceeds from creditors in some situations, and provide ongoing management through a named trustee. For families with blended relationships, minor beneficiaries, or special needs, an ILIT can be tailored to direct funds in a controlled manner while integrating with other documents such as a pour-over will or trust modification petition.
The Law Offices of Robert P. Bergman provides client-centered estate planning services with attention to California law and local practice in Humboldt County. Our approach emphasizes clear communication, careful document drafting, and practical solutions to preserve family wealth and ensure beneficiary protection. We help clients evaluate policy ownership transfer, draft trust provisions consistent with the client’s wishes, and coordinate related documents like certification of trust and HIPAA authorization. Our goal is to provide reliable guidance through each step of establishing an ILIT so clients in Bayside can move forward with confidence.
An ILIT is a trust that holds one or more life insurance policies on the grantor, with the trust named as the owner and beneficiary of the policies. Once created and funded according to the trust terms, the policy and its proceeds are managed by the trustee for the benefit of the named beneficiaries. The irrevocable nature of the trust means the grantor gives up ownership and certain control in exchange for the planning benefits the trust provides. Creating an ILIT requires careful timing, proper trust language, and attention to the transfer rules that can affect tax treatment under federal and state law.
Funding an ILIT often involves transferring an existing policy into the trust or having the trust purchase a new policy. If a transfer occurs, there can be a three-year look-back period for estate inclusion, so the timing of transfers must be planned thoughtfully. The trustee must manage premium payments, which can be facilitated by gifts from the grantor, and maintain records demonstrating that payments were made from trust funds. Clear beneficiary designations, a certification of trust for third parties, and coordination with other estate planning instruments are essential to achieve the intended outcomes for the grantor and beneficiaries.
An ILIT is designed to hold life insurance outside the grantor’s estate while providing a framework for managing and distributing policy proceeds. The trust document names a trustee to administer the policy, accept gifts to pay premiums, and distribute proceeds according to the terms agreed upon by the grantor. Because the trust is irrevocable, the grantor must sign away certain ownership rights, and the trustee becomes responsible for management. The trust can include provisions for continued income, lump sum distributions, or conditions for release, enabling the grantor to shape how the benefit is used by beneficiaries after the grantor’s death.
Establishing an ILIT involves drafting trust terms, selecting a trustee, determining how premiums will be funded, and transferring or issuing the insurance policy in the name of the trust. Critical clauses address trustee powers, beneficiary distributions, successor trustees, and coordination with other estate documents such as a pour-over will or trust modification petition. The grantor should also consider gift tax implications if premiums are funded via gifts, prepare a certification of trust for use with financial institutions, and review potential tax treatment. Proper documentation, execution, and follow-up are necessary to ensure the ILIT functions as intended under California law.
Understanding the common terms used in ILIT planning helps clients make informed decisions. Key phrases include grantor, trustee, beneficiary, funding, policy assignment, three-year rule, certification of trust, and pour-over will. These terms describe the roles of parties involved, the mechanics of transferring ownership, the timing considerations for tax treatment, and how an ILIT coordinates with other estate planning documents. A clear grasp of these concepts reduces surprises during administration and helps clients communicate precisely about their goals when drafting trust provisions or meeting with financial institutions and insurance carriers.
The grantor is the person who creates the trust and transfers assets or policies into it. In ILIT planning, the grantor typically establishes the trust and arranges that the trust will own the life insurance policy. Once the policy is transferred and the trust is irrevocable, the grantor has relinquished ownership and control over the policy in favor of the trustee’s administration under the trust terms. The grantor should carefully consider the implications of making an irrevocable transfer and the potential three-year look-back period for estate inclusion before finalizing this step.
The trustee is the individual or entity responsible for holding and administering the trust property, including any life insurance policies owned by the trust. Duties include managing premium payments, maintaining records, filing trust-related documentation when necessary, and making distributions to beneficiaries according to the trust’s instructions. Selecting a trustee who understands fiduciary responsibilities and can work with insurers and financial institutions is important for smooth administration. The trust document should set out successor trustees and powers to ensure continuity if a trustee becomes unable to serve.
The three-year look-back rule refers to a potential estate inclusion period that can apply when a life insurance policy is transferred into an ILIT. If the grantor transfers a policy to the trust within three years of their death, proceeds from that policy may still be included in the grantor’s estate for tax purposes. This timing issue is an important consideration when deciding whether to transfer an existing policy or to have the trust purchase a new policy. Careful planning helps minimize unintended tax consequences and ensures the trust functions as intended.
A certification of trust is a shortened document that provides key information about the trust to financial institutions and third parties without revealing the full trust terms. It typically identifies the trust, the trustee, and the trustee’s authority to act, while preserving privacy for the beneficiary provisions. Using a certification of trust can ease interactions with insurers and banks when the trust is the owner of a policy or holds other assets. Having a properly drafted certification helps trustees demonstrate their authority when managing trust assets and making transactions.
When evaluating an ILIT versus alternatives like retaining a policy in one’s estate or using revocable trusts, clients should weigh factors such as tax goals, administrative complexity, estate size, and family needs. Keeping a policy in one’s estate is simpler but can increase estate tax exposure and reduce privacy. A revocable living trust offers flexibility but does not remove the policy from the estate if the owner is the insured. An ILIT can isolate life insurance proceeds but requires relinquishing control and careful funding arrangements. Discussing these choices with a qualified attorney helps determine the most appropriate combination of documents for a household’s unique situation.
A more limited approach may be suitable for individuals whose life insurance policies are small relative to the overall estate or who do not face significant estate tax concerns. In such cases, keeping the policy in the individual’s name and relying on straightforward beneficiary designations could be sufficient, especially when family dynamics are uncomplicated and there are no concerns about creditor claims or complicated distribution conditions. Clients in this situation may prefer simpler arrangements that avoid the administrative steps and restrictions of an irrevocable trust while still providing direct proceeds to named beneficiaries.
If the life insurance need is expected to be temporary, such as covering a mortgage or short-term debts, a limited approach may make sense. Temporary coverage that will lapse or be replaced soon might not justify the permanence of an irrevocable trust. In these cases, using beneficiary designations and clear coordination with a will or revocable trust can provide adequate protection without the long-term constraints of an ILIT. It remains important to document intentions and ensure beneficiaries are current so proceeds are paid as intended.
A comprehensive plan that includes an ILIT, revocable trust, pour-over will, and related documents is often advisable for families with significant assets, blended households, business interests, or potential estate tax exposure. Combining multiple documents ensures coordinated treatment of assets, avoids unintended probate exposure, and aligns life insurance proceeds with other legacy objectives. Comprehensive planning also allows for contingencies like successor trustees, trust modification procedures, and protections for vulnerable beneficiaries, all of which contribute to a durable arrangement that functions smoothly at the time it is needed most.
When the goal is to protect beneficiaries from potential creditor claims, manage payouts to minors, or preserve assets for specific purposes such as education or disability needs, an integrated estate plan with an ILIT can help achieve those aims. A comprehensive approach ensures the life insurance proceeds are distributed under clear terms, coordinated with trusts or special needs arrangements if necessary, and aligned with broader long-term objectives. By drafting consistent provisions across documents, clients reduce the risk of conflicting instructions and make administration more efficient for those who will manage the estate.
A coordinated estate plan can provide tax planning benefits, protect beneficiary interests, and ensure assets are transferred according to the grantor’s wishes with reduced court involvement. Integrating an ILIT with instruments such as a revocable living trust, pour-over will, and healthcare directives creates a unified framework that addresses financial, medical, and successor decision-making needs. This unified approach promotes clarity for trustees and heirs, helps maintain privacy, and reduces the administrative burden on family members who will act after the grantor’s passing, supporting a smoother transition during a difficult time.
In addition to protecting life insurance proceeds from potential estate inclusion, a comprehensive plan facilitates ongoing asset management, provides for contingencies, and clarifies fiduciary responsibilities. Establishing clear trustee powers, successor provisions, and coordination for premium funding simplifies trust administration and can prevent disputes. The overall effect is a plan that not only addresses tax and financial concerns but also preserves family intent, supports minor or dependent beneficiaries, and integrates seamlessly with other common estate planning instruments used in California settings.
A comprehensive ILIT arrangement allows the grantor to specify how proceeds are distributed, whether in lump sums, installments, or under conditions aimed at protecting beneficiaries. This level of control helps ensure funds serve their intended purpose, such as funding education, providing for ongoing care, or supporting dependent family members. Detailed provisions in the trust document can set parameters for trustee discretion, outline distribution milestones, and include mechanisms for oversight, all of which help maintain alignment between the grantor’s wishes and the practical needs of recipients over time.
When properly implemented, an ILIT can help reduce estate inclusion of life insurance proceeds, streamline administration, and preserve privacy by avoiding probate for those assets. Administrative advantages include clear trustee responsibilities, a certification of trust for streamlined interactions with insurers and banks, and provisions for premium funding that minimize ambiguities. These features together can reduce the administrative load on survivors, lower the likelihood of disputes, and support smoother distribution according to the grantor’s long-term objectives.
Timing matters when transferring an existing life insurance policy into an ILIT because the three-year look-back rule can affect whether proceeds are included in the grantor’s estate. Before signing any transfer documents, review the policy history, understand premium payment responsibilities, and confirm how the transfer will be documented. Discuss whether purchasing a new policy in the name of the trust is preferable to transferring an existing policy. Proper timing and documentation reduce the risk of unintended tax consequences, and careful record-keeping will assist trustees when premiums are paid and claims are made.
Selecting a trustee for an ILIT involves balancing trustworthiness, administrative ability, and willingness to carry out the trust’s terms. Whether you name a trusted family member, a professional fiduciary, or a corporate trustee, be sure the chosen trustee understands responsibilities like premium management, record-keeping, and communication with beneficiaries and insurers. Include successor trustee provisions to maintain continuity if the primary trustee is unable or unwilling to serve. Clear trustee powers and guidance in the trust document reduce the risk of gaps in administration and ensure the grantor’s intentions are honored over time.
People choose an ILIT for a variety of reasons, including reducing estate inclusion of life insurance proceeds, controlling distributions for heirs, and protecting proceeds from potential creditor claims in certain circumstances. An ILIT can be tailored to address specific family dynamics, such as providing for minor children, protecting a spouse’s inheritance while preserving separate property for other beneficiaries, or integrating with other trusts for retirement or special needs planning. It is a planning option that can complement a revocable trust, wills, and healthcare directives to create a complete estate plan.
Additionally, an ILIT can provide privacy advantages by keeping insurance proceeds out of probate records and offering a structured approach to beneficiary payouts. When combined with documents like a certification of trust, pour-over will, or trust modification provisions, an ILIT can form part of a durable strategy to manage wealth transfer, support ongoing beneficiary needs, and reduce administrative burdens for survivors. Clients should review their overall estate goals and consult on the practical steps needed to implement an effective ILIT arrangement under California law.
Typical circumstances that lead individuals to consider an ILIT include having a large life insurance policy relative to an estate value, planning for blended families or younger beneficiaries who need supervised distributions, and wanting to reduce estate tax exposure. Business owners may use an ILIT as part of succession planning, while families with special needs members may use it in coordination with other trusts to protect benefits eligibility. Each scenario requires tailored drafting to align trust terms with intended distribution goals and to address funding and administrative practicalities.
When the estimated life insurance proceeds are a significant portion of an individual’s estate, an ILIT can be used to help separate those proceeds from probate and potential estate tax inclusion. This separation can preserve liquidity for estate obligations while directing benefits to heirs under controlled terms. Properly drafted trust provisions and timely funding are essential to ensure the intended tax and privacy benefits are achieved. Clients should review asset values, potential estate tax thresholds, and coordinate with broader estate planning instruments to determine whether an ILIT fits their situation.
An ILIT can be structured to provide for beneficiaries who require ongoing financial management, such as minors or individuals with limited capacity. The trust document can include provisions for staggered distributions, stipulations on use for education or healthcare, and instructions for trustees to manage funds prudently. When coordinating with other protections such as special needs trusts or guardianship nominations, an ILIT helps ensure life insurance proceeds support long-term well-being without jeopardizing public benefit eligibility. Careful drafting is necessary to align distributions with beneficiary needs and legal constraints.
Business owners often incorporate life insurance into succession plans to provide liquidity for buy-sell agreements or to support key family members during a transition. Holding policies within an ILIT can separate proceeds from the owner’s estate and provide a mechanism for timely distributions to fund buyouts or cover business expenses. An ILIT can be coordinated with retirement plan trusts and other business succession tools to address tax and cash flow considerations. Working through these arrangements in advance reduces uncertainty and positions the business and family for steadier continuity.
The Law Offices of Robert P. Bergman serves Bayside and neighboring communities in Humboldt County, offering estate planning services that include ILIT formation, trust drafting, pour-over wills, and healthcare directives. We focus on practical, legally sound solutions tailored to California law and local needs. Our office assists clients with document preparation, trust funding coordination, and post-death administration tasks such as providing a certification of trust to insurers and managing trustee responsibilities. Clients receive clear guidance about next steps and ongoing compliance for their estate plans.
Clients work with our firm because we prioritize clear communication and careful drafting to ensure estate documents reflect their goals. We guide clients through the practical requirements of establishing an ILIT, including timing considerations, funding strategies, and coordinating other estate instruments like wills and healthcare directives. Our role includes drafting a certification of trust and advising on trustee selection and successor arrangements. We aim to provide solutions that are durable, understandable, and implementable in the context of California law and local administrative practices.
When creating an ILIT, it is important to think through details such as premium funding, trustee responsibilities, and how the trust will interact with existing insurance policies and beneficiary designations. Our firm assists clients in assessing the best course of action—whether transferring a policy, issuing a new policy in the name of the trust, or coordinating a pour-over will with a revocable trust. We also help clients prepare essential documents like a HIPAA authorization and advance health care directive that complement broader estate planning objectives.
We are available to discuss practical options and to prepare trust documents and related instruments tailored to each client’s family circumstances and financial situation. For clients with retirement plans, special needs concerns, or business interests, we recommend integrated planning that aligns life insurance trust provisions with retirement plan trusts, guardianship nominations, and other relevant instruments. Our focus is on creating a cohesive plan that eases administration for those who will manage the estate and preserves the grantor’s intentions for future generations.
Our process begins with an initial consultation to review the client’s assets, existing policies, family structure, and planning goals. We explain the mechanics of ILIT formation, discuss timing and transfer implications, and explore funding strategies. After agreeing on an approach, we draft the trust document and any related papers such as a certification of trust, pour-over will, or HIPAA release. We assist with transferring or issuing policies, coordinating premium funding, and preparing trustees and beneficiaries for administration in the future.
The initial review focuses on understanding the client’s estate composition, insurance policies, and objectives for passing wealth to beneficiaries. We analyze policy ownership, beneficiary designations, and the potential impact of the three-year look-back rule. Based on this analysis, we recommend whether an ILIT is appropriate, whether a transfer or new policy is preferable, and how the ILIT should coordinate with other estate planning documents. The goal of this step is to establish a clear strategic plan that addresses both legal and practical considerations for implementation.
We begin by collecting policy statements, trust documents, wills, beneficiary designations, and financial statements relevant to the client’s estate. This information allows us to identify assets that should be coordinated with an ILIT and to detect potential issues such as existing ownership arrangements or beneficiary conflicts. A thorough asset review helps pinpoint whether additional documents, like a certification of trust or pour-over will, are needed and sets the stage for drafting precise trust language that reflects the client’s wishes and legal requirements under California law.
After assessing documents and goals, we discuss funding options for the ILIT, including gifts to the trust for premium payments, issuing a new policy in the trust’s name, or transferring an existing policy and managing timing risks. We address administrative considerations such as trustee selection, successor trustees, and the need for a certification of trust to interact with insurers and banks. This strategy conversation ensures the client understands trade-offs and is prepared to implement the selected approach with proper documentation and timing.
In this phase, we prepare the trust document, certification of trust, and any related instruments like powers of attorney or HIPAA authorizations. The trust language specifies trustee powers, distribution terms, successor arrangements, and any conditions on distributions. Once the documents are ready, we review them with the client, make any needed revisions, and supervise signing and notarization as required. Proper execution is essential to ensure the ILIT is valid and that third parties will recognize the trustee’s authority when administering the policy.
We assist in notifying insurers of the trust’s existence, providing a certification of trust where appropriate, and arranging for policy transfer or new policy issuance. Working with carriers and financial institutions can require specific forms and proof of trustee authority, and our office helps prepare and present the necessary documentation. This coordination helps reduce administrative delays, ensures premium payment arrangements are clear, and confirms the trust is accepted as the policy owner and beneficiary for purposes of future claims and communications.
We document how premiums will be funded, whether through gifts from the grantor, direct payments by the trust, or other arrangements. If gifts are used, we discuss applicable gift tax considerations and potential use of annual exclusion gifts. Clear documentation supports the trust’s ongoing administration and demonstrates the intended source of premium payments. This step reduces the risk of funding lapses and makes trustee obligations explicit, facilitating smoother long-term management of the policy and any related financial obligations.
After the ILIT is in place, ongoing administration includes paying premiums, maintaining records, communicating with beneficiaries, and updating documents when necessary. Trustees must follow the trust terms, manage investments if applicable, and keep accurate accounts for transparency. The grantor or trustees should periodically review the arrangement to confirm it remains aligned with changing financial situations, family circumstances, or law. When changes are needed in related estate documents, such as updating a pour-over will or executing a trust modification petition, we assist in implementing those adjustments.
Trustees should keep detailed records of premium payments, gifts to the trust, communications with insurers, and distributions to beneficiaries. Proper record-keeping supports transparency and helps prevent disputes or administrative complications. Trustees may need to provide accountings to beneficiaries or to courts in the event of contested matters. Maintaining an organized approach to documentation also facilitates efficient handling of claim processes when life insurance proceeds become payable and ensures the trust carries out the grantor’s intentions as written.
Periodic reviews help ensure the ILIT continues to meet the grantor’s objectives and coordinates effectively with other estate planning instruments. Changes in family circumstances, asset values, or legal developments may prompt updates to related documents like revocable trusts, pour-over wills, or powers of attorney. We recommend scheduled reviews and are available to draft trust modification petitions or related amendments when appropriate. Regular coordination minimizes the risk of conflicts and preserves the long-term effectiveness of the estate plan.
An Irrevocable Life Insurance Trust is a separate legal entity created to own and manage life insurance policies for the benefit of designated beneficiaries. The grantor creates the trust document, names a trustee to administer the policy, and transfers ownership of the policy to the trust or causes the trust to purchase a new policy. Because the trust is irrevocable, the grantor gives up certain ownership rights over the policy, and the trustee administers the trust according to the terms provided by the grantor. The trustee’s responsibilities include maintaining premium payments, communicating with insurers, and distributing proceeds according to the trust terms upon the insured’s death. An ILIT can be designed to provide lump sum distributions, staggered payments, or conditional disbursements tailored to beneficiary needs. The trust structure aims to accomplish estate planning goals such as greater control over distributions, coordination with other documents, and potential tax and privacy benefits when properly implemented.
Placing a life insurance policy in an ILIT can help reduce the likelihood that policy proceeds are included in the grantor’s estate for tax purposes, but the result depends on timing and how the transfer is handled. If a policy is transferred into the trust and the insured dies within a specified period, typically three years, the proceeds may still be includible in the estate. Proper planning, including consideration of whether to transfer an existing policy or have the trust buy a new one, is necessary to achieve the intended tax outcome. Estate tax treatment also depends on the size of the estate and current tax law thresholds. For many individuals, the primary benefit of an ILIT is the potential to isolate proceeds from probate and estate administration, along with enhanced control over distributions. Discussing the client’s full estate picture helps determine whether an ILIT will provide meaningful tax or administrative advantages in their situation.
One downside of an ILIT is its irrevocable nature, which requires the grantor to give up ownership and direct control of the policy. This permanence can limit flexibility if the grantor’s financial situation or family circumstances change. Additionally, transferring an existing policy into an ILIT can trigger the three-year look-back concern, which may lessen the anticipated tax benefit if death occurs soon after the transfer. Administrative demands on trustees for premium payments and record-keeping are another consideration. There may also be costs associated with drafting the trust, coordinating transfers or new policy purchases, and ongoing trustee administration. Selecting appropriate trustee provisions and funding mechanisms in advance helps mitigate operational burdens, but clients should weigh the trade-offs between long-term control benefits and the loss of direct policy ownership before deciding to proceed.
Premiums for a policy owned by an ILIT are typically paid from trust funds, which may come from gifts made by the grantor to the trust. These gifts can be structured to qualify for annual gift tax exclusions, and some trusts include withdrawal notice powers to help ensure gifts are treated properly for exclusion purposes. Precise documentation of gifts and premium payments is important to support tax treatment and to provide a clear record for trustees and beneficiaries. Alternatively, the trust may own and pay for a policy purchased directly by the trust at inception, avoiding a transfer. Regardless of the funding method, trustees must maintain accurate records of premium payments and gifts, and clients should discuss the practical arrangements early in the planning process to prevent funding lapses and ensure the trust can meet ongoing obligations.
Yes, an existing individual life insurance policy can often be transferred into an ILIT, but the timing and documentation must be handled carefully. When a transfer occurs, insurers and financial institutions will require formal paperwork showing the change of ownership to the trust, and the trustee must be prepared to manage the policy going forward. Importantly, transfers made within the three-year period before the insured’s death may cause proceeds to be included in the grantor’s estate, so timing is a significant consideration. Because of these timing concerns, some clients choose to have the ILIT purchase a new policy rather than transfer an existing one. Each option has trade-offs related to underwriting, policy cost, and tax planning, so reviewing the client’s overall estate and insurance situation helps identify whether a transfer or new policy purchase is the better path.
Choosing a trustee requires balancing trustworthiness, administrative ability, and willingness to carry out the trust’s terms. Some grantors name a trusted family member or friend who understands family dynamics and can manage relationships, while others select a corporate fiduciary or professional trustee to provide continuity and institutional support. The trust document should specify successor trustees to ensure uninterrupted administration if the primary trustee is unable or unwilling to serve. Trustees must be able to handle premium payments, interact with insurers and financial institutions, maintain accurate records, and communicate with beneficiaries. Trustees also need clear authority spelled out in the trust document to reduce ambiguity. Discussing options with legal counsel will help identify naming provisions and powers that fit the grantor’s priorities and the family’s needs.
The three-year rule can cause a transferred life insurance policy’s proceeds to be included in the grantor’s estate if the insured dies within three years of a transfer to an ILIT. This provision is designed to prevent recent transfers made solely to avoid estate inclusion. Because of the look-back period, clients transferring an existing policy should consider how soon they might pass and whether transferring is the best approach, or if establishing a new policy in the trust is preferable. When planning an ILIT, it is important to understand this timing consideration and to document transfers carefully. In some instances, clients choose to restructure coverage or adjust timing to mitigate the effect of the three-year rule. A thoughtful plan helps align the benefits of an ILIT with the client’s timeline and long-term objectives.
An ILIT should be part of a broader estate plan that may include a revocable living trust, pour-over will, durable financial power of attorney, advance health care directive, HIPAA authorization, and guardianship nominations if applicable. Coordination among these documents ensures consistent instructions for asset distribution, healthcare decisions, and financial authority. Including a certification of trust is helpful for third parties who will interact with the ILIT, such as insurers or banks, because it provides necessary information without exposing the full trust terms. Additional instruments, such as special needs trusts, retirement plan trusts, or a general assignment of assets to trust, may also be appropriate depending on family circumstances and asset types. Reviewing the complete estate picture helps identify which documents are needed to support the ILIT and to achieve comprehensive protection and administration goals.
An ILIT is often used in conjunction with a pour-over will and a revocable living trust to create a comprehensive estate plan. A pour-over will acts as a safety net, ensuring any assets not transferred during life are directed into the revocable trust at death. Because an ILIT is irrevocable and separate, life insurance owned by the ILIT is already outside the probate process and will not be controlled by the pour-over will, but coordination is important to ensure beneficiary provisions do not conflict and that overall goals are consistent. The revocable trust handles assets that remain under the grantor’s control during life and can be modified as circumstances change, while the ILIT provides a fixed structure for managing life insurance proceeds. Aligning provisions across these documents reduces the risk of administrative conflict and helps create a unified plan for transferring assets to beneficiaries according to the grantor’s wishes.
After the insured’s death, the trustee files a claim with the insurer and manages the receipt and distribution of proceeds according to the trust terms. Depending on the instructions, the trustee may make lump sum distributions, stagger payments over time, or use funds for trustee-directed purposes such as educational expenses or ongoing care. The trustee must also handle any reporting requirements, provide accountings as required by the trust, and maintain communications with beneficiaries about the administration process. If the trust was properly funded and executed, life insurance proceeds held by the ILIT should avoid probate and be distributed according to the grantor’s specified terms. Trustees should follow the trust provisions closely and keep thorough records to demonstrate compliance, and beneficiaries should be informed about the timing and nature of distributions as they occur.
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