An Irrevocable Life Insurance Trust (ILIT) can be an important part of an estate plan for residents of Lamont and the surrounding Kern County area. An ILIT holds ownership of a life insurance policy outside of a taxable estate, helping preserve policy proceeds for beneficiaries and reduce potential estate tax exposure. At the Law Offices of Robert P. Bergman we help families evaluate how an ILIT might fit into broader planning including revocable living trusts, wills, powers of attorney, and healthcare directives. If you want to protect the intended distribution of life insurance proceeds and minimize administrative burdens after death, an ILIT is a planning option to consider.
Deciding to establish an ILIT involves a mix of legal structuring and careful administration. The trust must be drafted to meet legal requirements, ownership and beneficiary designations must be properly transferred, and funding arrangements should be clear to avoid unintended tax consequences. We guide clients through choosing trustees, naming beneficiaries, and coordinating an ILIT with other documents such as pour-over wills and trust certifications. For many families in Lamont this planning provides peace of mind by clarifying how insurance proceeds will be used for estate liquidity, ongoing care of loved ones, or to support legacy intentions without increasing probate complexity.
An ILIT can deliver several practical benefits for estate administration and family security. By removing a life insurance policy from an individual’s taxable estate the trust can help reduce estate tax exposure and keep proceeds out of probate administration. This structure also creates clarity over how proceeds will be distributed and can protect funds from certain creditor claims after death. For families with liquidity needs, an ILIT can provide immediate resources to pay taxes, debts, or expenses without forcing the sale of other assets. Proper planning ensures the trust aligns with retirement plan trusts, irrevocable provisions, and unique family circumstances.
The Law Offices of Robert P. Bergman serves clients in Lamont, San Jose, and across California focusing on practical estate planning solutions. Our approach emphasizes clear communication, tailored document drafting, and reliable follow-through so clients understand how each element of a plan functions together. We prepare revocable living trusts, pour-over wills, powers of attorney, advance health care directives, trust modifications, and a range of specialized trust documents including irrevocable life insurance trusts and irrevocable life insurance trust funding steps. Clients working with the firm receive responsive support throughout drafting, funding transfers, and ongoing trust administration matters.
An ILIT is a trust that owns and controls a life insurance policy on a grantor’s life. Once the policy is transferred into the trust the grantor no longer retains direct ownership, which generally prevents the death benefit from being included in the taxable estate. Funding and administration must follow precise timelines and rules to avoid inclusion under federal or state tax regulations. The trustee is responsible for managing premium payments and distributing proceeds according to the trust terms. Proper coordination with beneficiary designations, trust certification, and related trust documents is essential to achieve the intended outcomes.
Establishing an ILIT requires attention to both the legal documents and the administrative mechanics that follow. The drafting must clearly set out trustee powers, distribution standards, and the role of any trust protector or co-trustee. After the trust is created, ownership of the policy must be retitled and premiums should be paid from trust funds or via documented gifts from the grantor. If premium payments are made by the grantor without appropriate gift arrangements the policy can be drawn back into the estate for tax purposes. Our office helps clients follow these steps so the trust functions as intended.
An ILIT is a legal entity created to hold a life insurance policy outside an individual’s estate. It is drafted so the grantor gives up ownership of the policy and the trust, thereby removing the death benefit from the owner’s taxable estate in most cases. The trust document names a trustee to manage the policy, receive proceeds, and distribute funds according to the grantor’s instructions. Because an ILIT is irrevocable, changes are limited after execution. The trust can include provisions for income distribution, special needs planning, or ongoing management for beneficiaries including pets and dependent family members.
Creating an ILIT involves drafting the trust instrument, transferring ownership of an existing life insurance policy or naming the trust as owner of a new policy, arranging premium funding, and ensuring trustee responsibilities are clear. The grantor must make documented gifts to the trust if premiums are paid by the grantor and may use annual exclusion gifts or other strategies to fund the trust. Trustees must keep accurate records, make timely premium payments, and handle distributions according to the trust’s terms. Coordination with beneficiary designations and related estate planning documents helps avoid unintended tax or probate results.
Familiarity with common terms helps clients make informed decisions about ILITs and how they interact with broader estate planning. Terms such as grantor, trustee, beneficiary, funding, policy ownership, gift tax rules, and estate inclusion describe different legal and administrative functions. Knowing these definitions clarifies responsibilities and the sequence of steps needed to preserve the intended benefits of a trust. Below are short glossary entries that explain several important concepts and how they relate to setting up, funding, and administering an irrevocable life insurance trust.
The grantor is the person who creates the trust and transfers assets into it. In the context of an ILIT the grantor typically transfers ownership of a life insurance policy to the trust or purchases a new policy owned by the trust. Once the transfer is complete the grantor generally gives up direct control over the policy, and this change in ownership is intended to remove the policy proceeds from the grantor’s taxable estate. The grantor may still provide funds to the trust for premium payments through properly documented gifts and must understand the tax implications of those gifts.
The trustee is the individual or institution appointed to manage the trust and its assets according to the trust terms. For an ILIT the trustee is responsible for making premium payments, maintaining trust records, communicating with beneficiaries, and distributing proceeds after the insured’s death. Choosing a trustee involves assessing reliability, record keeping ability, and willingness to follow the grantor’s directions. The trustee also must handle any necessary filings and coordinate with other estate documents so distributions align with the overall plan for beneficiaries and any heirs who rely on the trust funds.
A beneficiary is the person or entity designated to receive trust assets or insurance proceeds. In an ILIT beneficiaries may include family members, trusts for minors, charitable organizations, or a retirement plan trust that receives distributions for a surviving spouse. The trust document should describe how and when beneficiaries receive distributions and may include conditions, staggered payments, or provisions for dependent care. Properly naming beneficiaries and structuring distributions helps ensure the death benefit is used according to the grantor’s intentions while reducing the chance of disputes or costly administration procedures.
Gift funding refers to the approach where the grantor makes gifts to the trust to cover insurance premiums. Because the grantor has given up ownership of the policy, any ongoing premium payments must be accomplished through formal gifts or through trust assets. Annual exclusion gifts can be used to transfer funds without generating gift tax liability if the amounts qualify; otherwise other planning may be needed. Proper documentation of gifts and timely payments is important to maintain the intended estate benefits and avoid rules that could pull the policy proceeds back into the grantor’s estate for tax purposes.
When evaluating an ILIT against options like keeping the policy personally owned, using a revocable living trust, or relying on beneficiary designations alone, consider tax treatment, creditor exposure, and probate outcomes. A revocable trust offers flexibility and control during life but does not remove the policy from the taxable estate unless ownership is transferred into an irrevocable arrangement. Keeping a policy personally owned may be simpler but can result in estate inclusion. An ILIT generally offers a way to segregate life insurance proceeds for heirs and reduce estate administrative burdens when implemented and funded correctly.
If the overall estate value is well below applicable federal and state thresholds and life insurance proceeds will not meaningfully affect tax exposure, keeping a policy outside of an ILIT may be appropriate. A simpler arrangement reduces administrative complexity and may avoid adding another trust to manage. In these cases maintaining up-to-date beneficiary designations and coordinating coverage with a revocable trust or will can meet goals while avoiding the additional requirements that an ILIT demands. It remains important to review overall planning periodically as asset values and tax laws can change.
When the need for life insurance is temporary, such as covering a mortgage or short-term business obligation, a limited approach might be more practical. A personal ownership arrangement paired with clear beneficiary designations can provide the necessary protection during the relevant period. If the policy will be surrendered or replaced in the near future, establishing an ILIT may not be worth the administrative requirements. Still, even temporary needs deserve documentation so beneficiaries are clear about intended uses and so that coverage aligns with the larger estate plan.
For estates where insurance proceeds could push total assets toward or above estate tax thresholds, an ILIT can be an effective way to manage potential tax exposure. Combining an ILIT with other planning tools like a revocable living trust, retirement plan trusts, and advanced directives can create an integrated plan that addresses liquidity, asset preservation, and beneficiary needs. A comprehensive approach evaluates the family’s long-term goals, identifies potential tax liabilities, and implements structures designed to protect intended distributions while coordinating administration across multiple documents.
When family situations involve blended families, beneficiaries with special needs, minor children, or complex liquidity requirements, an ILIT can be part of a broader toolbox to ensure funds are used as intended. The trust document can include distribution timing, conditions, or provisions that work in tandem with special needs planning or guardianship nominations. Comprehensive planning helps prevent unintended consequences, reduce the chance of conflicts, and ensure that life insurance proceeds are available in a manner consistent with ongoing care and legacy objectives for loved ones.
A coordinated planning approach can bring clarity and efficiency to estate administration by aligning documents, beneficiaries, and funding strategies. Using an ILIT alongside a revocable living trust and pour-over will can ensure that assets pass according to a unified plan and reduce delays caused by probate. This approach also helps guarantee that life insurance proceeds are available when heirs need them most, whether to pay taxes, maintain a home, or provide continuing income. By documenting the intended flow of assets and appointing reliable trustees and guardians, families gain predictability during an emotionally difficult time.
Comprehensive planning also helps protect beneficiaries from unintended financial consequences and clarifies roles for trustees and fiduciaries. The ability to coordinate an ILIT with retirement plan trusts, special needs trusts, pet trusts, and guardianship nominations reduces the risk that one element of a plan will unintentionally undermine another. Regular reviews and updates to account for life events, changes in assets, or legal developments ensure that the strategy continues to meet family needs. This intentional coordination supports ongoing management of assets and avoids surprises for beneficiaries.
One of the main benefits of using an ILIT as part of a comprehensive plan is improved handling of insurance proceeds in relation to estate taxes and creditor claims. By placing a policy into an irrevocable trust and following appropriate funding rules, the death benefit can remain outside the grantor’s estate for estate tax calculations. This arrangement can preserve more wealth for intended beneficiaries and prevent administrative complications. Integrating the ILIT with other estate vehicles strengthens overall protection and clarifies how resources will be used to meet family obligations and legacy goals.
A trust-centered approach often reduces the need for probate and speeds access to funds after death by providing a clear mechanism for distribution. When life insurance proceeds are paid to a trustee, they can be used quickly to address pressing needs such as estate taxes, final expenses, and income for surviving dependents. This reduces the stress on families during settlement and helps avoid delays associated with court-supervised probate proceedings. Thoughtful instructions in the trust and coordination with other estate documents help avoid disputes and simplify the administration process.
When funding premiums for an ILIT, clear documentation is essential. Gifts from the grantor to the trust should be recorded and ideally follow annual exclusion rules when appropriate. Without clear funding records the policy can be at risk of being included in the estate for tax purposes. Work with counsel to document regular gift transfers and consider coordinating with financial advisors to ensure gifts are made on schedule. Accurate record keeping supports the intended estate treatment and helps trustees comply with their administrative responsibilities once the trust is in place.
Ensure beneficiary designations and trust provisions are aligned so proceeds flow to the ILIT as intended. Naming a trust as the owner and beneficiary of a policy or retitling an existing policy requires careful coordination with the insurer and timely paperwork. Mismatched designations or incomplete transfers can cause funds to be paid directly to an individual rather than into the trust, undermining the planning objective. Regularly review designations after life events such as marriage, divorce, or the birth of a child to maintain consistency with your overall estate plan.
Consider establishing an ILIT if you want to segregate life insurance proceeds from your taxable estate, provide liquidity for heirs, or ensure funds are managed for beneficiaries who may be young or have ongoing needs. An ILIT can be part of a broader plan that includes revocable living trusts, pour-over wills, and retirement plan trust arrangements. Families with real estate holdings, business interests, or significant retirement assets often use ILITs to preserve value for heirs and to provide funds for expenses that could otherwise force asset sales during settlement.
An ILIT may also be appropriate for those who want to create a defined legacy, support charitable giving after death, or provide for dependent family members while limiting direct distributions. When beneficiaries may face creditor claims or divorce proceedings, trust structures can add a layer of protection for proceeds by controlling distribution mechanics. Deciding whether an ILIT fits your plan requires assessing assets, family dynamics, and goals for how proceeds should be used, and it is advisable to review these issues with counsel familiar with estate and trust administration requirements.
Typical circumstances that prompt consideration of an ILIT include planning for estate tax exposure, providing for minor children or beneficiaries with special needs, preserving business continuity, and protecting assets from probate. Families with significant life insurance policies intended to replace lost income or to cover estate taxes often use ILITs to ensure those proceeds are accessible and designated for their intended purposes. In blended family situations or where long-term management of funds is desired, an ILIT provides a framework for orderly administration and tailored distribution provisions.
When estate values approach levels that could trigger tax liabilities, an ILIT may help limit the inclusion of life insurance proceeds in the taxable estate. By creating a properly funded trust and transferring policy ownership, grantors can reduce the portion of their estate subject to tax calculations. This planning can preserve more assets for beneficiaries and make it easier to satisfy tax obligations without disrupting the family’s financial stability. Implementing this approach requires care to ensure transfers and premium funding comply with relevant tax rules and timing requirements.
When children are young or beneficiaries have vulnerabilities that require managed support, an ILIT allows the grantor to specify how proceeds will be held and distributed over time. The trust can provide for education, living expenses, and long-term care while appointing a trustee to carry out these directions. Such arrangements prevent lump-sum distributions that may not serve a beneficiary’s long-term interests and provide a degree of oversight and stewardship for those who may not be ready to manage a large inheritance on their own.
Business owners and property holders sometimes use ILITs to ensure liquidity is available to cover taxes, debts, or transition costs after an owner’s death. Life insurance proceeds held in a trust can provide cash to support buy-sell arrangements, pay estate settlement costs, or maintain operations during a period of transition. By separating insurance proceeds from the taxable estate and probate process, an ILIT can make it easier for successors to address immediate financial needs without forcing sales of business interests or real estate at inopportune times.
We provide local support for clients in Lamont and throughout Kern County who are considering an ILIT as part of their estate plan. Our team guides clients through drafting trust instruments, coordinating policy transfers, preparing funding strategies, and documenting gifts for premium payments. We also help coordinate ILITs with related documents such as revocable living trusts, pour-over wills, healthcare directives, and powers of attorney. Local counsel familiar with California rules can help ensure documents are tailored to state law and aligned with your broader family and financial objectives.
At the Law Offices of Robert P. Bergman we focus on practical, well-documented estate planning solutions that reflect each client’s goals. Our approach emphasizes clear drafting, careful coordination of beneficiary designations and trust ownership, and step-by-step assistance with policy transfers and premium funding. We prioritize direct communication and attention to detail so clients understand the reasons behind each decision and how documents work together. For individuals in Lamont and across California, this service helps ensure the ILIT is implemented correctly and maintained as circumstances evolve.
We assist clients with a broad range of estate documents frequently used alongside an ILIT including revocable living trusts, pour-over wills, advance health care directives, and powers of attorney. This integrated approach reduces the risk that one document will conflict with another and supports a smoother administration after death. Our office also helps prepare certificates of trust and other records trustees may need to manage assets. By coordinating these elements we help clients achieve more predictable outcomes and reduce administrative burdens for beneficiaries.
Clients appreciate a responsive process that addresses both the drafting and the practical funding tasks required to make an ILIT effective. We work with insurance carriers, financial advisors, and trustees to transfer ownership properly and to develop a sustainable premium funding plan. For families with retirement plan trusts, special needs arrangements, or pet trusts we help integrate ILIT provisions so proceeds supplement, rather than disrupt, long-term plans. Contact our firm to discuss how an ILIT might fit into your estate planning goals in Lamont and Kern County.
Our process begins with an initial consultation to understand family goals, existing assets, and any insurance policies in place. We review current documents such as wills, living trusts, powers of attorney, and beneficiary designations to identify how an ILIT would coordinate with the rest of the plan. Following that review we draft the trust document tailored to the client’s intentions and advise on trusteeship, funding strategies, and timing. Once the client approves the document we assist with policy transfers, beneficiary updates, and trust funding to ensure the ILIT functions as intended.
The first step is a careful planning meeting to identify goals, beneficiaries, and any existing policies. We analyze whether to transfer an existing policy into the trust or to have the trust purchase a new policy. During drafting we prepare clear language about trustee duties, distribution terms, and funding mechanisms. We also discuss the timing of transfers to avoid estate inclusion rules such as three-year lookback periods for transferred policies. By addressing these considerations at the start we reduce later complications and create a workable administration structure.
When drafting the ILIT we articulate the grantor’s intentions about distributions, name trustees and successors, and include provisions for premium funding and trustee powers. The document may contain instructions for handling proceeds in cases such as education funding, special needs support, or ongoing income distributions. We include administrative provisions for trustee reporting and record keeping so beneficiaries receive timely information. Clear drafting at this stage provides a roadmap for trustees and helps avoid fiduciary disputes or misunderstandings later on.
Coordination with revocable living trusts, pour-over wills, beneficiary designations, and other documents is essential to ensure the ILIT functions properly. We review existing estate documents to make sure there are no conflicts and that beneficiary designations align with the trust terms. If changes are needed to a will or trust to capture pour-over arrangements or to document contingent beneficiaries, we prepare those updates concurrently. This coordination reduces the risk of unintended results at the time of distribution and streamlines administration.
After the trust is signed, ownership of the life insurance policy must be transferred to the trust or the trust must be named owner and beneficiary at issuance. Where a transfer occurs, the insure company must update records and the trustee must confirm ownership. Funding the trust for premium payments requires careful gift documentation and adherence to annual exclusion rules when applicable. We assist with drafting gift letters, coordinating with financial institutions, and confirming that premium payment arrangements are documented to protect the intended tax treatment of the policy proceeds.
Policy transfers require insurer forms to change ownership and beneficiary designations. The trustee must accept ownership and understand the responsibilities for premium payments. If ownership is not properly transferred or accepted the policy may remain within the grantor’s estate. We coordinate directly with insurance carriers when necessary and help ensure the trust receives required documents such as certificates of trust and proof of trustee authority. Thorough follow-through helps avoid administrative errors that could undermine the planning benefits.
If the grantor will make gifts to the trust to cover premiums, these transfers should be documented with gift letters and consistent records. Annual exclusion strategies may allow transfers without gift tax consequences for certain amounts, but larger sums may require additional planning. We help prepare the necessary documentation and recommend procedures for maintaining records of all transfers and payments so the trust’s funding history is clear. Good documentation supports the desired estate treatment and helps trustees fulfill their administrative duties responsibly.
Once the ILIT is in place, ongoing attention ensures the trust continues to operate as intended. Trustees must make timely premium payments, maintain accurate records, and provide notices to beneficiaries where required. Periodic reviews of the trust are also advisable to account for changes in family circumstances, tax laws, or insurance needs. When distributions become necessary after the insured’s death, the trustee will follow the trust instructions to allocate funds consistent with the grantor’s wishes. Regular check-ins help keep the plan current and functional.
Trustees must manage payments, keep clear records of gifts and distributions, and communicate with beneficiaries. Good administration includes maintaining financial statements, confirming premium payments are made on time, and handling tax reporting obligations if any apply. Trustees should retain records of insurer correspondence, trust certifications, and decisions made regarding distributions. These practices protect both trustees and beneficiaries by creating a transparent record of how the trust was managed and how proceeds were allocated in accordance with the trust terms.
Life changes such as births, deaths, marriages, divorces, or significant shifts in asset values may require review of ILIT provisions and related estate documents. Periodic reviews ensure beneficiary designations remain accurate and funding plans continue to be appropriate. If policy replacements or changes are needed, those decisions should be coordinated with the trust structure to preserve intended benefits. We recommend scheduled reviews with counsel to confirm the ILIT and related documents reflect current goals and legal conditions so the plan remains effective over time.
An Irrevocable Life Insurance Trust is a trust created to own a life insurance policy. Once the policy is transferred and the trust accepts ownership, the grantor no longer owns the policy directly and the death benefit is generally kept outside the grantor’s taxable estate. The trust document names a trustee to manage the policy, make premium payments, and distribute proceeds according to the grantor’s directions. The ILIT’s terms can specify distribution timing, uses for proceeds, and any protective provisions for beneficiaries. Setting up an ILIT requires careful drafting and administrative steps. Ownership must be retitled with the insurer and the trustee must accept responsibilities. Funding premiums requires either existing trust assets or documented gifts from the grantor. If transfers and funding are not properly executed there is a risk that proceeds could be included in the estate. We assist clients through these steps to align the trust structure with their broader estate plan and family goals.
Transferring an existing policy to an ILIT can have tax implications if not done with attention to timing rules. Federal rules include a three-year lookback period in which transfers into an irrevocable trust may still be included in the estate if the grantor dies within three years of the transfer. Proper planning helps clients understand and manage these timing rules and consider alternatives when immediate tax treatment is a concern. Other tax consequences may arise depending on how premiums are funded and whether gifts exceed annual exclusion amounts. Documented gifting strategies and cooperation with financial advisors can reduce gift tax exposure. We advise clients on the timing and methods of transfers to minimize tax risk and coordinate the ILIT with the rest of the estate plan so outcomes are aligned with the grantor’s objectives.
Once a policy is transferred to an ILIT the grantor gives up direct ownership and therefore control over the policy. The trustee appointed under the trust instrument manages the policy and is responsible for premium payments and decisions about distributions. The trust document can grant certain directives about how the trustee should act, but the grantor cannot unilaterally revoke ownership without the trustee’s agreement or a legal modification of the trust’s terms. If control during life is important, clients may consider alternate structures or retain flexibility through careful selection of trustee duties and powers. Some grantors name a trusted family member and provide clear written instructions for administration. It is important to balance the desire for specific outcomes with the transfer’s irreversible nature and to document intentions in a way that trustees can follow after the grantor’s death.
Premium payments after transfer can come from trust assets or from gifts made by the grantor to the trust. When premiums are funded by gifts the grantor should document those transfers and consider the annual gift tax exclusion rules. A common approach is to make annual exclusion gifts to the trust sufficient to cover premiums; the trustee then uses those funds to pay the insurer. Accurate record keeping of gifts and payments helps maintain the intended estate treatment. If the grantor makes premium payments directly to the insurer without documenting gifts to the trust, the IRS may consider the policy still effectively owned by the grantor for estate tax purposes, which could defeat the intended benefits. We work with clients to implement documented funding plans and to coordinate with insurers so payments and ownership records are consistent with the ILIT structure.
Selecting a trustee involves considering reliability, financial literacy, availability, and willingness to administer the trust according to its terms. Some families choose a trusted individual such as a family member or close friend, while others select a professional fiduciary or corporate trustee for continuity and administrative capabilities. The choice depends on the complexity of the trust, the nature of the beneficiaries, and the level of administrative work required. Regardless of the choice, name successor trustees to ensure continuity and provide clear written powers and duties in the trust document. Trustees will need to keep records, pay premiums, and communicate with beneficiaries. Planning for trustee succession and defining the scope of their authority reduces uncertainty and eases administration at the time proceeds are paid out.
An ILIT can be used alongside a revocable living trust and a pour-over will as part of a cohesive estate plan. The ILIT serves a distinct purpose by specifically holding a life insurance policy and directing how proceeds are handled, while a revocable trust typically manages other assets during incapacity and death. Coordination ensures that beneficiary designations on retirement accounts and insurance policies complement trust provisions and that pour-over provisions do not conflict with the ILIT’s direction. When combining multiple documents it is important to review all beneficiary designations and ownership records so proceeds are directed according to the overall plan. Updating wills, trust certifications, and related documents at the time an ILIT is created helps prevent conflicting instructions that could complicate administration or diminish intended protections for heirs.
When the insured dies the life insurance company pays the death benefit to the ILIT as named beneficiary or owner. The trustee then administers those proceeds according to the trust instructions which can include immediate payments, staggered distributions, funding of other trusts, or payments for specific needs such as education or medical expenses. The trust terms determine how funds are allocated and whether beneficiaries receive lump sums or ongoing support. The trustee must follow the trust’s distribution schedule and maintain records of how funds are used. Clear directions in the trust reduce the potential for disputes among beneficiaries and make administration more efficient. If tax or creditor issues arise, the trustee may need to consult counsel to ensure distributions comply with legal requirements and the trust’s purposes.
Yes, an ILIT can be drafted to support other planning goals such as providing funds to a special needs trust or contributing to a pet trust. The ILIT itself may contain instructions to fund or supplement these other trust vehicles, ensuring the grantor’s intentions for care and support are carried out. Careful drafting is needed to avoid disrupting public benefits for a beneficiary with special needs and to ensure funds are used as intended without exposing them to unnecessary claims. Integrating an ILIT with special needs planning or a pet trust requires thoughtful coordination of distribution language and trustee powers. We draft provisions that allow trustees to make payments in a manner that supports the beneficiary while preserving access to necessary public benefits and meeting the grantor’s wishes for ongoing care and maintenance of a pet or dependent individual.
The time required to set up and fund an ILIT varies with complexity but typically involves an initial planning meeting, drafting of the trust document, execution of the trust, and coordination with the insurer for transfers. Drafting and execution may take a few weeks to finalize language and obtain signatures. Transferring ownership and completing insurer processing can add additional weeks depending on carrier procedures and the responsiveness of involved parties. Funding the trust for premiums and documenting gifts may continue as an ongoing process. If an existing policy is transferred, timing rules such as the three-year inclusion period should be considered. We assist clients throughout this timeline to complete transfers and maintain records so the ILIT begins functioning according to plan without unnecessary delay.
An ILIT can help keep life insurance proceeds out of probate because the policy is owned by the trust rather than the insured at death. When proceeds are payable to the trustee they are distributed according to the trust terms without passing through probate court, which can speed access for beneficiaries and reduce public administration of those funds. However, other assets not held in trust may still require probate depending on how they are titled and designated. To maximize the probate-avoidance benefits of a trust-centered plan, coordinate ownership and beneficiary designations across accounts and real property and consider a revocable living trust for other assets. Regular review and updates ensure that titling and beneficiary choices continue to support probate avoidance and align with the overall estate planning strategy.
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