An Irrevocable Life Insurance Trust (ILIT) can be an effective component of a thoughtful estate plan for residents of Dixon Lane-Meadow Creek. This guide explains how an ILIT functions, who benefits from its use, and the typical considerations families face when deciding whether to create one. An ILIT removes life insurance proceeds from an estate, helping to preserve more of a policy’s value for beneficiaries and potentially reducing estate administration burdens. Our goal here is to outline practical steps, common documents, and decision points so you can make an informed choice about whether an ILIT fits your long-term planning goals.
Choosing to place a life insurance policy into an ILIT often involves coordination with other estate planning instruments, such as trusts, wills, and powers of attorney. For many households, aligning beneficiary designations, funding arrangements, and trust terms prevents unintended tax consequences or probate complications. This guide highlights typical trust provisions, the role of trustees, and how trust ownership affects access to policy loans or changes in coverage. It also covers common follow-up actions after a policyholder’s death so families understand how proceeds are handled and distributed according to trust terms and state rules.
An ILIT is valuable for families seeking to control how life insurance proceeds are managed and distributed after a policyholder’s death. By transferring policy ownership into a trust that cannot be revoked, the proceeds are generally excluded from the grantor’s taxable estate, which can preserve more funds for heirs and reduce probate-related delays. An ILIT also allows for customized distribution terms, creditor protection for beneficiaries in many situations, and structured payout options tailored to specific family needs. Careful drafting and proper trust administration are essential to obtain the intended benefits and to avoid unintended tax or ownership consequences.
The Law Offices of Robert P. Bergman provides estate planning representation for clients throughout California with a focus on clear, practical guidance. Our team works with individuals and families to design trust documents, coordinate beneficiary designations, and implement funding strategies that reflect client goals. We emphasize careful planning and thorough communication so clients understand how an ILIT interacts with wills, powers of attorney, and healthcare directives. Our approach prioritizes transparency, responsiveness, and personalized plans that reflect family circumstances and the desire to preserve assets for future generations while managing administrative responsibilities.
An Irrevocable Life Insurance Trust is a legal entity created to own and manage life insurance policies for the benefit of designated beneficiaries. Once a policy is transferred into the trust, the grantor typically cannot change the trust terms or reclaim the policy, which is why an ILIT is considered irrevocable. This permanent structure is useful when the intent is to keep life insurance proceeds out of an estate, provide asset protection for beneficiaries, and control how proceeds are distributed. Establishing an ILIT involves drafting the trust document, transferring ownership of the policy, and naming a trustee to administer the trust on behalf of beneficiaries.
Funding an ILIT often requires deliberate steps to ensure transfers are valid and do not create unintended tax consequences. Grantors commonly use the trust to purchase a new policy or transfer an existing one into trust ownership, and they may make annual gifts to the trust to cover premiums. Proper documentation and timely actions are essential to ensure the trust receives expected gifts and that the policy ownership change is recognized for estate and gift tax purposes. A trustee manages trust assets and distributes proceeds according to the trust terms when the insured person dies.
An Irrevocable Life Insurance Trust is a trust that becomes the owner and beneficiary of one or more life insurance policies, with the terms of the trust governing how proceeds are held and distributed. Unlike revocable trusts, an ILIT cannot be altered or revoked by the grantor once properly executed and funded, which is central to achieving certain estate planning advantages. The trust document appoints a trustee to manage the policy and any cash proceeds, and it typically includes instructions for distributing funds to beneficiaries under specified conditions. The legal formation and funding of an ILIT must be handled methodically to achieve the intended tax and asset protection outcomes.
Critical elements of an ILIT include the trust agreement, trustee appointment, funding mechanism, beneficiary designations, and administration procedures. Creating an ILIT generally requires drafting clear trust terms, transferring or obtaining a life insurance policy in the name of the trust, and establishing a method for funding premium payments, often through annual gifts from the grantor. Trustees need guidance on maintaining premium payments, handling any policy loans or changes, and documenting gifts to the trust. Regular reviews ensure the ILIT aligns with changing family circumstances and remains consistent with broader estate planning objectives.
Understanding common terms helps demystify ILIT planning and administration. Terms such as grantor, trustee, beneficiary, premium funding, estate inclusion, and gift tax are regularly used when discussing ILITs. Knowing what each term means in practice helps clients make informed choices and work effectively with counsel and trustees. The definitions below provide concise explanations of these concepts and show how each plays a role in successfully implementing and maintaining an ILIT. Clear terminology reduces confusion and supports better decision making throughout the estate planning process.
The grantor is the person who creates the trust and transfers assets or a life insurance policy into it. In the context of an ILIT, the grantor typically funds premium payments by making gifts to the trust and initiates the trust terms that govern distribution to beneficiaries. Once the trust is properly funded and the policy is owned by the trust, the grantor usually cannot change trust provisions or reclaim the policy. Understanding the grantor’s responsibilities is important for proper funding and to ensure the trust functions as intended under applicable tax and probate rules.
The trustee is the individual or entity charged with managing the trust, including paying premiums, keeping records, and distributing proceeds according to trust terms. Trustees must act in the best interests of beneficiaries and follow the instructions set out in the trust document. Duties include maintaining communication with beneficiaries, ensuring compliance with funding procedures, and handling administrative tasks after the insured’s death. Choosing a reliable trustee matters because this role affects how smoothly benefits are administered and whether the trust’s objectives are achieved for beneficiaries over time.
A beneficiary is any person or entity entitled to receive distributions from the trust under its terms. ILITs allow grantors to name primary and contingent beneficiaries and to set conditions for distributions such as age milestones, educational needs, or other specified events. Proper beneficiary designation and trust drafting help ensure that proceeds are used as intended and provide clarity for trustees. Well-drafted distribution provisions can protect assets from claims, manage funds for minor children, and support long-term planning goals for family members or charitable causes.
Funding an ILIT commonly involves the grantor making regular gifts to the trust to cover life insurance premiums. These gifts may be structured to qualify for the annual gift tax exclusion and should be documented to show that the trust received the funds and applied them to premium payments. Properly documented funding prevents unintended inclusion of policy proceeds in the grantor’s estate and ensures the trust remains equipped to maintain the policy. Trustees should keep records of gift receipts, premium payments, and any lender arrangements to support the trust’s administration and tax treatment.
When evaluating an ILIT, it helps to compare its benefits and tradeoffs with alternative planning tools such as revocable trusts, beneficiary designations, or outright ownership of policies. A revocable trust offers flexibility but does not remove assets from the taxable estate, whereas an ILIT can reduce estate inclusion at the cost of permanence. Beneficiary designations are simple but may lack conditional distribution controls. Ownership of a policy outside a trust provides direct access but could expose proceeds to estate taxes or creditor claims. Choosing among these options depends on family goals, asset size, and preferences for control and privacy.
For individuals with modest estates or straightforward beneficiary arrangements, a limited approach such as updating beneficiary designations and maintaining a revocable trust may be sufficient. If there is no concern about estate taxes or creditor exposure, keeping a life insurance policy outside of an irrevocable trust simplifies administration and retains flexibility for the policy owner. This approach reduces the need for additional trust paperwork and trustee coordination. Carefully reviewing the whole estate and discussing goals can determine whether simplicity better serves family needs than the permanence of an ILIT.
When maintaining the ability to change coverage, modify beneficiaries, or borrow from a policy is a priority, keeping the policy outside an irrevocable trust provides that flexibility. Policy owners who anticipate significant future changes in health, finances, or family structure may prefer arrangements that allow adjustments without the restrictions of an irrevocable instrument. Revocable trusts and beneficiary designations can be updated as circumstances evolve, offering a less permanent path while still providing planning benefits such as probate avoidance and straightforward asset distribution.
For households with larger estates where estate tax exposure is a concern, a comprehensive strategy that includes an ILIT can help preserve more value for beneficiaries by removing life insurance proceeds from the taxable estate. This approach requires careful drafting, coordination with other trusts, and attention to gift tax rules. A coordinated plan will address how premiums are funded, how trust distributions are structured to meet family needs, and how the ILIT fits into the overall transfer strategy. Such planning often involves ongoing reviews to respond to changes in law and family circumstances.
An ILIT can be part of a broader plan to provide creditor protection for beneficiaries and to control distributions through trust terms that limit immediate access to proceeds. When clients wish to protect inheritances for minors, family members with special needs, or beneficiaries who may be vulnerable to creditor claims, trustees can hold proceeds and make distributions under specified conditions. Incorporating an ILIT in a comprehensive plan allows for tailored distribution schedules, spendthrift provisions, and coordination with other trusts to deliver long-term financial security for intended recipients.
Taking a comprehensive approach that integrates an ILIT with the rest of an estate plan offers clarity about how life insurance proceeds will be used and increases the likelihood that assets are distributed according to the grantor’s wishes. This approach can reduce administrative delays, provide privacy by avoiding probate, and enable tailored protections for beneficiaries. A cohesive plan also addresses coordination of documents so that wills, powers of attorney, healthcare directives, and trust instruments work together rather than conflicting, which reduces confusion during emotionally challenging times.
Comprehensive planning often anticipates possible future events and builds in mechanisms to adjust to changes without unintended consequences. Reviewing beneficiary designations, trust funding strategies, and trustee duties periodically helps ensure the ILIT remains aligned with family goals and any legislative updates. A well-structured plan can ease the administration burden on trustees, provide guidance for timely premium payments, and document funding steps that support favorable tax treatment. Ultimately, a comprehensive strategy aims to create continuity and predictability for loved ones after the insured person’s death.
An ILIT can help reduce estate tax exposure by removing life insurance proceeds from the grantor’s taxable estate when properly structured and funded. Preserving policy proceeds for heirs means more resources are available to provide for family needs and long-term goals. Additionally, structuring how proceeds are distributed through a trust can protect funds from immediate depletion and provide stable support to beneficiaries. Careful planning ensures that the actions taken to secure these benefits are consistent with the applicable tax and trust rules and are documented for future administration.
Trust-based ownership of a life insurance policy allows grantors to set conditions for how proceeds are used, such as phased distributions, education funding, or support for a surviving spouse. These tailored instructions can provide beneficiaries with long-term financial stability while reducing the risk that proceeds are misused or subject to creditor claims. Inclusion of spendthrift provisions and clear trustee powers helps align distributions with the grantor’s intent. Thoughtful drafting ensures that the trust’s terms are practical to administer and reflect the family’s priorities.
When funding premiums for an ILIT, maintain detailed records of gifts from the grantor to the trust and receipts of payments by the trustee. Proper documentation supports the trust’s tax treatment and shows that gifts were made and used for their intended purpose. If annual gift tax exclusions are relied upon, documentation is especially important to demonstrate eligibility. Clear records also help trustees manage cash flow for premium payments and any policy-related expenses. Good recordkeeping reduces potential disputes and simplifies administration after the insured’s death.
Ensure that ILIT provisions align with the rest of the estate plan to avoid conflicting instructions and unintended tax consequences. Coordinate beneficiary designations, pour-over wills, powers of attorney, and healthcare directives so each document supports the same goals. Regular reviews of the overall plan are important whenever family circumstances change, when policies are replaced, or when laws affecting estate or gift taxes are updated. Thoughtful coordination reduces confusion, streamlines administration, and helps preserve the grantor’s intentions for the use of life insurance proceeds.
Consider establishing an ILIT when preserving life insurance proceeds outside of an estate is a priority, when controlled distributions to beneficiaries are desired, or when creditor protection for payouts is important. Families with significant life insurance coverage or potential estate tax exposure often find ILITs beneficial. Additionally, an ILIT can help provide for minor children, support a surviving spouse while protecting inheritance for future generations, or fulfill specific charitable intentions. A careful assessment of financial goals and family dynamics will determine whether an ILIT serves those objectives effectively.
An ILIT may also be appropriate when clients prefer that proceeds be managed over time rather than distributed outright. For example, trusts can set milestones for distributions, fund education, or provide periodic support, which can be especially helpful for beneficiaries who are young or who may benefit from fiduciary oversight. Clients who expect changes in wealth, wish to reduce probate matters, or want predictable administration of life insurance proceeds should evaluate an ILIT in the context of their full estate plan to ensure it aligns with broader wishes.
Typical circumstances that prompt consideration of an ILIT include large life insurance policies intended to pay estate taxes, the desire to provide for children while protecting assets from creditors, or plans to preserve assets for multiple generations. Other situations include second marriages where one wants to ensure children from a prior marriage receive specific benefits, and family members with limited financial management experience. In each case, an ILIT can be tailored to address the particular concerns and distribution preferences of the grantor while preserving clarity and control over proceeds.
When life insurance proceeds are expected to be substantial relative to the overall estate, an ILIT can help move those proceeds outside of the taxable estate to reduce potential estate tax exposure. Properly implemented, this strategy helps ensure beneficiaries receive the intended benefit without unnecessary tax reduction. Achieving the intended outcome requires careful timing, valid transfers, and documented premium funding. Individuals facing potential estate tax issues should consider how an ILIT fits into their overall transfer plan and whether it complements other trust arrangements to preserve family assets.
An ILIT can provide protections for beneficiaries who may be vulnerable to creditor claims, unstable spending habits, or special needs. Trust terms can be drafted to limit immediate access to large sums and to require trustee oversight for distributions. This helps prevent rapid depletion of funds and provides a structured approach to financial support. When beneficiaries include minors or individuals who require long-term care provisions, designing thoughtful distribution terms in an ILIT can ensure support while preserving funds for ongoing needs.
Families with blended relationships often use an ILIT to guarantee that children from a prior marriage receive specified benefits while also providing for a surviving spouse. Trust provisions can balance immediate support and long-term preservation for descendants, ensuring that assets are distributed according to the grantor’s intention across family branches. An ILIT supports these goals by separating life insurance proceeds from competing claims and specifying how distributions should be allocated among spouses, children, and other beneficiaries.
The Law Offices of Robert P. Bergman serves clients in Dixon Lane-Meadow Creek and across Inyo County with a full range of estate planning services, including formation and administration of Irrevocable Life Insurance Trusts. We help clients evaluate whether an ILIT fits their personal and financial goals, prepare trust documents, coordinate policy transfers, and advise trustees on ongoing management. Our approach emphasizes clear communication and practical planning so families understand the steps needed to implement a trust and how it will function over time to protect and manage life insurance proceeds for intended beneficiaries.
The Law Offices of Robert P. Bergman offers focused attention to each estate planning matter and works to align trust documents with clients’ broader goals. We prioritize responsive communication, careful drafting, and thorough documentation so that funding and trustee responsibilities are clear. Our practice assists clients at every stage, from initial decision-making about an ILIT to trustee guidance after a policyholder’s death. Clients receive practical counsel that anticipates administrative issues and promotes a smooth transition of benefits to beneficiaries in accordance with the trust terms.
We guide clients through the technical steps involved in creating and funding an ILIT, including preparing the trust agreement, coordinating policy ownership changes, and documenting annual gifts used for premium payments. Our process helps ensure required formalities are observed to achieve the intended estate planning and tax results. We also work with trustees to explain ongoing responsibilities, recordkeeping needs, and procedural matters that arise during the life of the trust, providing clarity at each stage for everyone involved.
Clients appreciate practical solutions and clear explanations about how an ILIT integrates with other estate planning documents like wills, powers of attorney, and advance healthcare directives. We focus on creating durable plans that reflect family priorities and adapt to changing circumstances. Whether helping draft distribution terms, advising on funding mechanisms, or supporting trustees during administration, our team provides steady guidance aimed at preserving the value and intent of life insurance proceeds for the benefit of named beneficiaries.
Our firm follows a step-by-step approach that begins with an initial consultation to identify goals and review existing policies and documents. We then draft a tailored trust agreement, advise on transferring or issuing a policy in the trust’s name, and prepare funding mechanisms for premiums, often through documented annual gifts. We provide trustees with administrative checklists and sample forms to assist with recordkeeping. Periodic reviews are recommended to confirm that the ILIT remains aligned with client objectives and any relevant legal changes.
The first step is a careful assessment of your current estate plan, insurance policies, family needs, and financial goals. We gather documents and discuss objectives such as tax considerations, beneficiary protection, and distribution preferences. Based on that information, we draft an ILIT agreement with clear trustee powers, distribution instructions, and funding provisions. We also prepare any related documents, such as a pour-over will or trust certification forms, to ensure coordination among all estate planning instruments.
During this stage, we review life insurance policies to determine whether to transfer an existing policy into the trust or to acquire a new policy owned by the trust. We examine current beneficiary designations and coordinate changes so that ownership and beneficiary designations reflect the planned trust structure. This review helps identify potential gaps and ensures that policy changes are implemented correctly to achieve the trust objectives without creating unintended estate inclusion or tax problems.
We prepare the ILIT agreement with precise language covering trustee duties, funding mechanisms for premium payments, and distribution terms for beneficiaries. The trust documents include instructions on how the trustee should handle premium payments, loans against the policy, and any surrender decisions. We provide clear funding templates and sample gifting letters to document annual contributions, ensuring that the trust is well-positioned to maintain the policy and achieve the grantor’s objectives.
After the trust is executed, the next step is to transfer or obtain policy ownership in the trust’s name and to implement the funding plan. If transferring an existing policy, we coordinate with the insurance company to change ownership and beneficiary designations and document the transfer. If the trust will own a new policy, we assist with the application and placement of coverage in the trust’s name. We also help establish the process for the grantor to make premium gifts to the trust and ensure the trustee documents receipt and payment.
We handle communications with insurers to complete necessary forms for ownership transfers or to place a new policy in the trust’s name. This coordination includes ensuring that the insurer has correct trust documentation, that beneficiary changes are recorded properly, and that any medical or policy underwriting issues are addressed. Clear coordination with the insurance company reduces delays and helps protect the intended estate planning outcomes when ownership and beneficiary designations are updated.
To maintain the trust’s funding mechanism, grantors commonly make annual gifts to cover premiums and the trustee documents these gifts and payments. We prepare gift letters and tracking forms that the trustee can use to show receipts and premium disbursements. Proper documentation supports the intended tax treatment and ensures transparency in trust administration. This recordkeeping is also helpful for trustees who may need to account for gifts and payments during ongoing administration or after the insured’s death.
Once an ILIT is in place and the insured passes away, the trustee administers the policy proceeds according to the trust terms. Administration includes filing necessary notices, distributing funds to beneficiaries, fulfilling any trust-imposed conditions, and maintaining records of transactions. Trustees may also coordinate with other estate representatives, such as executors of related wills, to ensure beneficiaries receive assets as intended. Effective administration ensures the grantor’s wishes are carried out and that distributions are handled efficiently and transparently.
Following the insured’s death, trustees must claim policy proceeds, invest or hold funds prudently as directed by the trust, and make distributions consistent with trust provisions. Trustees will prepare accounting records, communicate with beneficiaries, and resolve any necessary tax filings or creditor inquiries. Maintaining clear records and following the trust instructions reduces the risk of disputes and helps beneficiaries understand the timing and rationale for distributions. Trustees should also work with counsel when complex issues arise during administration.
When life insurance proceeds are part of a broader estate plan, trustees and estate representatives coordinate to ensure distributions align with overall goals. This may include coordinating with executors, administrators of other trusts, or financial advisors to reconcile assets and deliver intended benefits. Effective coordination reduces duplication, prevents conflicting instructions, and simplifies the process for beneficiaries. By addressing these matters in advance, the estate plan can guide trustees and other fiduciaries through a smooth administration process.
An Irrevocable Life Insurance Trust is a permanent trust established to own life insurance policies and manage proceeds for named beneficiaries. When a policy is placed into the trust, the trust becomes the owner and beneficiary, and the trustee manages the policy and eventual distributions according to the trust terms. The grantor typically makes gifts to the trust to cover premium payments, and the trustee handles administration. The trust’s irrevocable nature means the grantor generally cannot change the trust terms or reclaim the policy once it is properly funded and transferred. Creating an ILIT requires precise steps to avoid unintended tax or ownership issues. Proper execution includes drafting clear trust provisions, documenting premium funding, and coordinating with the insurance company to effect ownership changes. Trustees must keep records, manage premium payments, and follow distribution instructions upon the insured’s death. Careful planning at the outset helps ensure the ILIT functions as intended and provides the anticipated benefits to beneficiaries.
Funding an ILIT usually involves the grantor making periodic gifts to the trust that the trustee then uses to pay insurance premiums. Grantors often structure these contributions to take advantage of the annual gift tax exclusion, and trustees should document receipt of gifts and subsequent premium payments to establish a clear record. This documentation helps support the intended tax treatment and provides transparency for future administration. The trustee is responsible for applying gifted funds to premiums and maintaining records of payments and receipts. If the trust owns an existing policy, coordination with the insurance company is required to change ownership and ensure premium billing aligns with the trust’s funding plan. Clear procedures and documentation reduce the likelihood of disputes or unintended inclusion of proceeds in the estate.
Placing a policy into an ILIT can affect the policy owner’s rights, including the ability to borrow against policy cash value. Once the trust owns the policy, borrowing typically requires trustee authorization and must be consistent with the trust document and the insurer’s rules. Policy loans and other changes should be considered carefully since they can affect the policy’s tax and estate consequences. Trustees should review policy terms and coordinate with financial advisors when contemplating loans or other policy transactions. Before transferring a policy to a trust, evaluate how loans would be handled under trust ownership and whether current borrowing needs will be affected. In some cases, clients opt to retain certain rights by keeping a policy outside the trust or structuring funding in a manner that preserves access while achieving other planning objectives. Discussing borrowing intentions in advance helps avoid conflicts after the transfer.
An ILIT can provide a degree of protection for proceeds against creditor claims in many circumstances, because funds held in trust are subject to the trust terms and not directly owned by individual beneficiaries. Trust provisions such as spendthrift clauses can limit a beneficiary’s ability to assign or pledge their interest, which may reduce vulnerability to certain creditors. However, the extent of protection depends on the trust structure, timing of transfers, and applicable state law. Judges may examine transfers made in anticipation of creditor claims, so the context and timing matter. Protection from divorce claims can also be influenced by state family law and whether funds are considered separate property. In some cases, trust distributions may be treated differently than outright inheritances. Because outcomes depend on facts and law, it is important to design trust provisions with these considerations in mind and to obtain guidance on how a trust may operate in the relevant jurisdiction.
A trustee’s primary duties include managing the trust’s assets, ensuring premium payments are made, keeping accurate records of gifts and disbursements, and distributing proceeds according to the trust document. Trustees must act prudently and in the best interests of the beneficiaries, following the instructions provided by the grantor. This includes filing necessary notices after the insured’s death, making distributions as directed, and maintaining transparent communication with beneficiaries about the trust’s administration. Trustees also handle interactions with insurers, manage any policy loans or changes if authorized, and preserve documentation that supports the trust’s tax and accounting positions. When complex issues arise, trustees should consult with counsel or financial advisors to fulfill their duties properly and to reduce the risk of disputes or administrative errors.
An ILIT typically complements a will and any revocable living trust by handling life insurance proceeds outside the probate process. While a will governs assets that pass through probate, the ILIT controls the insurance proceeds placed into it. If a pour-over will is used, assets not transferred during life may be directed into a revocable trust at death, but life insurance placed in an ILIT is governed by its own trust terms. Coordination among all documents ensures consistent treatment and avoids conflicting instructions about who should receive assets and under what conditions. Reviewing beneficiary designations, wills, and trust provisions together prevents overlap and confusion. Proper coordination makes certain that each document serves its intended role within the overall plan and helps trustees and executors administer assets smoothly according to the grantor’s wishes.
Creating and funding an ILIT can have gift and estate tax implications that depend on timing and funding methods. Grants to the trust used to pay premiums may qualify for the annual gift tax exclusion if properly structured and documented, but transfers of policy ownership may be subject to additional rules if the insured dies within a short window following the transfer. Careful timing and adherence to applicable tax rules help ensure the trust achieves the intended estate planning benefits. Because tax laws change and individual circumstances vary, reviewing the proposed ILIT with knowledgeable counsel and keeping good records of gifts and payments is important. This helps demonstrate the grantor’s intent and supports the trust’s tax treatment when tax matters arise.
If the insured dies shortly after transferring a policy into an ILIT, special rules may affect whether the proceeds are included in the grantor’s estate. Many jurisdictions apply a lookback period during which transfers of life insurance may still be considered part of the estate for tax purposes if the insured dies within that timeframe. Understanding the timing rules and planning transfers well in advance can help avoid unintentionally including proceeds in the estate. When a transfer occurs near the time of death, trustees and counsel should carefully review the facts and applicable rules to determine the proper tax and estate treatment. Prompt communication with insurers and thorough documentation also support an orderly administration during a difficult time for beneficiaries.
Transferring an existing policy into an ILIT is often possible, but the decision between transferring a current policy and having the trust purchase a new policy depends on age, health, policy terms, and tax planning considerations. Transferring an older policy may be straightforward in some cases, while underwriting for replacement coverage could be more favorable in others. Each option has benefits and potential drawbacks that should be weighed in light of the client’s overall plan and the policy’s characteristics. Before deciding, review the existing policy’s cash value, loan features, and surrender charges, as these factors can influence whether a transfer or new purchase is preferable. Coordinating with insurers and completing the transfer or purchase correctly is essential to preserve the intended estate planning benefits.
Regular reviews of an ILIT and related estate documents are advisable whenever family circumstances change, when policies are replaced or modified, or when significant changes in wealth occur. Periodic reviews also help address legal or tax law changes that could affect trust administration or intended outcomes. Setting a routine review schedule ensures documents continue to reflect current wishes and financial realities. During reviews, confirm that trustee information is current, beneficiary designations align with the trust terms, and funding procedures remain effective. Updating related instruments such as wills, powers of attorney, advance healthcare directives, and trust certifications maintains consistency across the estate plan and reduces the chance of unexpected conflicts.
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