An Irrevocable Life Insurance Trust (ILIT) is a common estate planning tool used to hold life insurance policies outside of an insured person’s taxable estate. This guide explains how an ILIT operates, who can benefit, and how it interacts with other estate planning documents such as revocable living trusts, pour-over wills, powers of attorney, and health care directives. If you are considering ways to protect life insurance proceeds from estate tax exposure, ensure liquidity for estate obligations, or support beneficiaries in a controlled manner, understanding ILITs can help you make informed decisions tailored to your family’s circumstances in Clear Lake Riviera.
An ILIT involves creating a trust that owns one or more life insurance policies and designates beneficiaries independent of the insured’s probate inventory. By transferring an existing policy into the trust or having the trust purchase a new policy, the policy proceeds may not be counted as part of the insured’s gross estate for federal estate tax purposes when properly structured. Establishing an ILIT requires careful drafting to avoid unintended inclusion of the policy in the estate, and coordination with beneficiary designations, titling, and premium funding methods is important for the trust to operate effectively and deliver the intended financial protection and planning results.
An ILIT can provide several meaningful benefits within an overall estate plan by helping to preserve policy proceeds for beneficiaries, reduce potential estate tax exposure, and provide liquidity to cover debts, taxes, or other obligations. When properly structured, insurance proceeds held in an ILIT are typically excluded from the insured’s taxable estate, which can increase the net inheritance available to loved ones. In addition, an ILIT allows for more precise distribution rules, protections for younger or financially inexperienced beneficiaries, and options for funding trusts over time to meet premium obligations, all of which contribute to a more predictable legacy strategy.
The Law Offices of Robert P. Bergman focuses on delivering practical, client-centered estate planning services tailored to the needs of families and individuals in California. Our approach emphasizes clear communication, careful documentation, and coordination across estate planning documents like wills, trusts, powers of attorney, and health care directives. We work to design irrevocable life insurance trusts that reflect the client’s goals for asset protection, tax planning, and beneficiary care, while ensuring the trust provisions and related beneficiary designations align to avoid unintended tax or probate consequences. We prioritize solutions that are durable, flexible, and responsive to life changes.
An ILIT is a trust that is irrevocable after its creation and holds ownership of life insurance policies. Once the trust becomes the owner and beneficiary of a policy, the policy proceeds are managed according to the trust’s terms after the insured’s death. Funding the trust with the premiums or arranging gifts to pay premiums is an essential part of the plan. Because the trust is irrevocable, the insured typically cannot retain incidents of ownership if the intended estate tax benefits are to be achieved. The trust document must be carefully drafted to address distribution timing, trustee powers, and permissible uses of the death benefit for beneficiaries.
Setting up an ILIT requires coordination with the insurance carrier, trustee, and any third-party contributors who will provide premium gifts. The trustee is responsible for receiving premium contributions, managing trust assets, ensuring premiums are paid on time, and disbursing proceeds according to the trust terms. The trust often includes provisions for how proceeds will be used to pay estate obligations, support surviving family members, or fund other trusts. Careful attention must be given to gift tax considerations, the timing of transfers, and whether short-term transfers could unintentionally include the policy in the taxable estate.
An Irrevocable Life Insurance Trust is a trust that holds life insurance policies and cannot be modified or revoked by the grantor after it is created, except under limited circumstances provided by law. Its primary purpose is to remove the death benefit from the insured’s taxable estate and to control how proceeds are distributed to beneficiaries. The trust document identifies the trustee, sets the terms for managing premiums and distributions, and typically prevents the insured from retaining rights or ownership that could cause estate inclusion. Effective ILIT drafting also contemplates successor trustees, tax reporting, and procedures for funding and managing the trust over time.
Core elements of an ILIT include the trust instrument itself, the trustee appointment, beneficiary designations, method for funding premiums, and coordination with existing estate planning documents. The process begins with planning and drafting the trust agreement, transferring or arranging ownership of the life insurance policy, and establishing mechanisms to fund premiums without creating unintended tax consequences. Trustees must be designated who will accept management responsibilities and follow procedures for payment of premiums, filing required tax forms if necessary, and distributing death benefits. Ongoing reviews are recommended to ensure the trust continues to meet the client’s objectives as assets and family circumstances evolve.
Understanding common terms helps demystify how ILITs fit into an estate plan. Terms like incidents of ownership, grantor, trustee, beneficiary, taxable estate, and premium funding are central to planning and execution. The definitions below are intended to give a clear explanation of frequently used concepts so that you can make informed decisions and ask targeted questions. Accurate terminology supports proper drafting and administration, which helps avoid mistakes that could alter tax consequences or beneficiary outcomes after the insured’s death.
Incidents of ownership refer to rights or privileges retained by the insured or grantor that are associated with a life insurance policy, such as the ability to change beneficiaries, borrow against the policy, or surrender it for cash. If the insured retains incidents of ownership at the time of death, the policy’s death benefit may be included in the taxable estate. To achieve the intended estate planning result, the ILIT must be structured so the insured does not hold these ownership rights, and the trust must actually own and control the policy under terms that remove those powers from the insured.
The grantor is the person who creates the ILIT and transfers the policy or provides initial funding for the trust. The trustee is the individual or institution appointed to manage the trust, pay premiums, and administer the death benefit according to the trust terms. A trustee’s duties include recordkeeping, tax filings if required, and carrying out the distribution instructions. Selecting a trustee who will follow the grantor’s intent and manage administrative responsibilities reliably is an important decision when establishing an ILIT.
Crummey gifts are a common technique used to make transfers to the ILIT that qualify as present interest gifts for annual gift tax exclusion purposes. Typically, beneficiaries are given a limited right of withdrawal for a short period after a gift is made, which preserves the donor’s ability to use the annual exclusion. Proper notice and documentation are critical to this strategy. Understanding the applicable gift tax rules and maintaining accurate records ensures that premium funding does not create unintended gift tax liabilities or fail to achieve the intended exclusion benefits.
The taxable estate includes the value of assets that are counted for federal estate tax purposes at death. If life insurance proceeds are included in the taxable estate because of retained ownership rights or other technical issues, the estate tax burden can increase and reduce the net amount passed to beneficiaries. Proper ILIT drafting and administration aims to prevent estate inclusion by ensuring ownership and control rests with the trust rather than the insured, while taking into account timing rules and any applicable state or federal tax laws that affect valuation and reporting.
When evaluating ILIT options, individuals may consider a limited approach that addresses only immediate policy ownership versus a comprehensive strategy that integrates the ILIT with broader estate planning documents. A limited approach might be faster and less costly in the short term, but it can leave gaps where the policy’s administration, beneficiary protection, or tax consequences have not been fully addressed. A comprehensive ILIT plan coordinates beneficiary designations, funding mechanisms, and successor trustee arrangements, and aligns the trust with wills, living trusts, powers of attorney, and health care directives to create a cohesive, long-term plan for asset transfer and family support.
A limited ILIT approach can be appropriate when the insured has a straightforward estate profile and the primary objective is to remove one or two life insurance policies from probate or basic estate inventory. In such cases, a focused transfer of ownership with clear beneficiary designations and a simple trustee arrangement may meet immediate planning needs. This route is often chosen when there are no complex tax concerns, minimal wealth exposure to estate tax thresholds, and when beneficiaries are mature and do not require detailed protections or staged distributions provided by more elaborate trust provisions.
When the expected ongoing administration is minimal and the funding of premiums can be managed informally by family members without creating gift tax complications, a limited ILIT setup may suffice. This approach assumes there is confidence in prompt premium payment and a low risk of contested ownership or beneficiary disputes. It is appropriate when preserving basic insurance benefits and avoiding probate are primary goals, and when there are no foreseeable changes that would require revising trust terms or engaging in comprehensive coordination with other estate planning instruments.
A comprehensive ILIT plan is advisable when the estate has complexity, potential estate tax exposure, or when the arrangement needs to coordinate with multiple documents such as revocable living trusts, retirement plan trusts, or special needs trusts. In these situations, careful drafting and strategic funding are essential to avoid unintended tax inclusion or conflicts among beneficiary designations. A comprehensive approach also anticipates future changes in family circumstances, asset composition, and applicable laws, providing flexibility to address contingencies while maintaining the trust’s intended protective and planning functions.
When beneficiaries require protection from creditors, spendthrift concerns, or potential mismanagement, a comprehensive ILIT can include detailed distribution rules, staged payouts, and trustee discretion provisions designed to preserve the benefit over time. Additionally, a coordinated plan can ensure life insurance proceeds are available to provide liquidity to pay estate taxes, debts, and final expenses without forcing the sale of family property or business interests. The structure of the ILIT can be tailored to align with other protective vehicles such as special needs trusts or retirement plan trusts to achieve cohesive outcomes.
A comprehensive ILIT approach reduces the risk of technical errors that could invalidate intended tax advantages and ensures that trusts, wills, and beneficiary designations work together to preserve assets and follow the grantor’s wishes. By integrating the ILIT with an overall estate plan, clients can create clear strategies for paying estate obligations, protecting heirs from creditors, and providing for minor or dependent beneficiaries with structured distributions. Regular reviews and updates are part of a comprehensive plan so that changes in law, family dynamics, or financial circumstances are reflected in the trust’s administration and funding strategies.
Another important benefit is predictability. A coordinated plan clarifies who manages the policy, how premiums will be handled, and the conditions for distributing proceeds, which reduces the potential for disputes. This predictability can also protect retirement assets and other resources by ensuring life insurance proceeds are used as intended rather than being subject to probate or creditor claims. Overall, a comprehensive ILIT plan promotes continuity for family finances and can help ensure that legacy goals are preserved and executed smoothly after the insured’s passing.
Removing life insurance proceeds from the taxable estate can reduce estate tax liability and preserve more assets for beneficiaries, and a comprehensive ILIT helps accomplish this while arranging for liquidity to cover immediate obligations. The trust structure can provide clear instructions for how proceeds should be applied to taxes, debts, and other estate needs to prevent forced asset sales. In addition, an ILIT can be used in concert with other planning tools so that liquidity is provided in a way that aligns with long-term goals and the financial stability of the surviving family members.
A comprehensive plan enables carefully drafted trust provisions that protect beneficiaries from creditor claims, irresponsible spending, or unintended outcomes by specifying how and when distributions occur. The ILIT can direct distributions for education, health, maintenance, and support in a way that reflects the grantor’s priorities and family needs. This level of control helps ensure that life insurance proceeds serve their intended purpose, providing stability and ongoing financial support for loved ones while reducing the likelihood of disputes or inefficient distribution of assets.
Ensure beneficiary designations on the life insurance policy match the ILIT ownership and that no conflicting designations remain that could undermine the trust’s purpose. Consistency between the insurer’s records and the trust document avoids disputes and reduces the risk of the policy being included in the taxable estate. Regularly review policy ownership and beneficiary forms after major life events, and keep clear documentation of transfers and trustee acceptance to support the trust’s intended tax and distribution outcomes over time.
Select a trustee who will keep thorough records, pay premiums on time, and follow the trust’s distribution instructions responsibly. Consider naming successor trustees and including provisions that make administration straightforward in the event of incapacity or death of a trustee. Clear trustee powers and duties in the trust document support orderly management, compliance with tax reporting duties if any arise, and timely distribution of proceeds according to the grantor’s intent while minimizing administrative friction for beneficiaries.
An ILIT can be an important tool for those who wish to keep life insurance proceeds out of the taxable estate, provide liquidity to pay estate obligations, or ensure proceeds are managed for the benefit of heirs. The trust structure can enable controlled distributions, creditor protection for beneficiaries, and alignment with other estate planning documents to help ensure coordination and clarity. If preserving wealth for future generations, protecting inheritances from unforeseen claims, or managing how distributions are made are priorities, an ILIT should be evaluated as part of a broader plan.
People often choose an ILIT when they face potential exposure to estate taxes, have business interests that require liquidity at death, or want to provide for minor children or vulnerable beneficiaries through staged distributions. An ILIT can be adapted to fit many needs, including funding other trusts or providing for specific uses like education or long-term care. Because the trust is irrevocable, establishing an ILIT requires thoughtful consideration of intentions, durable drafting, and periodic review to confirm it continues to meet family and financial objectives over time.
ILITs are commonly used when individuals have life insurance policies intended to provide for surviving family members, cover estate taxes, or provide liquidity for business transitions. They are also useful when beneficiaries may need protections from creditors or when the grantor wishes to control the timing and manner of distributions. Families with blended relationships, significant retirement assets, or valuable real estate holdings may find an ILIT helpful in achieving orderly transfers that reflect their goals while minimizing administrative burdens and potential tax inefficiencies after death.
When the size of an estate suggests there may be exposure to federal or state estate tax, transferring life insurance policies to an ILIT can help preserve wealth for heirs. The ILIT is designed to prevent inclusion of the policy proceeds in the insured’s taxable estate if properly structured. This approach can provide liquidity to pay estate taxes or debts without forcing the sale of assets, thereby protecting family-owned property or business interests and helping to maintain continuity in the family’s financial plans.
An ILIT allows the grantor to set terms that offer protection and stewardship for minor children or beneficiaries who may be vulnerable to financial mismanagement. The trust can direct staged distributions over time, set conditions for distributions, and provide for trustee discretion for support and maintenance. These features help ensure that life insurance proceeds are used responsibly to support long-term needs rather than being dissipated quickly, thereby providing a lasting financial safety net for those who require guided management.
Business owners commonly use ILITs to make sure that life insurance proceeds are available to fund buy-sell agreements, pay estate taxes, or provide liquidity for business continuity after an owner’s death. By keeping the proceeds outside the taxable estate, the ILIT can supply necessary cash without disrupting the operation of the business or forcing sales of interests under unfavorable conditions. This planning tool supports orderly ownership transitions and helps maintain the value and stability of business assets for surviving partners and family.
We provide focused estate planning services to residents of Clear Lake Riviera and the surrounding Lake County communities, including drafting and implementing Irrevocable Life Insurance Trusts, coordinating beneficiary designations, and integrating ILITs with wills, revocable trusts, and powers of attorney. Our goal is to help clients develop practical strategies that address tax, liquidity, and beneficiary protection needs while ensuring documents are clearly drafted and administered. We also assist with successor trustee planning, funding strategies, and periodic plan reviews to keep documents current with changing circumstances and laws.
Clients rely on an approachable process that focuses on clear communication, careful drafting, and coordination among the various estate planning documents. We work with clients to create ILITs that reflect their family goals and financial realities, while providing practical guidance on premium funding, trustee selection, and coordination with retirement accounts and other assets. Our process emphasizes attention to detail to reduce the risk of unintended tax or probate consequences and to make administration clear and manageable for trustees and beneficiaries.
Our service includes comprehensive planning meetings to understand each client’s objectives, drafting of tailored trust documents, assistance with transferring policy ownership and beneficiary designations, and ongoing support for any needed adjustments. We prioritize transparent fee discussions and structured timelines so clients know what to expect from trust formation through implementation. By focusing on durable planning and practical administration, we help clients create ILITs that operate smoothly and stand up to later challenges or changes in circumstances.
In addition to initial trust drafting, we assist with trustee acceptance, funding coordination, and recordkeeping recommendations so the ILIT can be administered with confidence. Periodic reviews and updates are encouraged to respond to life events such as births, deaths, marriages, or changes to financial or tax situations. This ongoing approach helps keep the ILIT and related documents aligned with the client’s goals and reduces the likelihood of costly surprises for survivors when the trust becomes operative.
Our process begins with a comprehensive intake to learn about assets, family structure, and planning goals, followed by a detailed review of existing policies and estate documents. We draft the trust instrument with tailored provisions, assist with policy transfers or new policy purchases by the trust, and coordinate funding and trustee acceptance. After execution, we provide guidance on administration, premium funding procedures, and recordkeeping. We also schedule follow-up reviews to confirm the IRA, retirement accounts, and beneficiary designations remain aligned with the ILIT and overall estate plan.
During the initial consultation we discuss the client’s objectives, identify existing life insurance policies, evaluate potential tax and beneficiary issues, and determine whether an ILIT is appropriate based on family and financial circumstances. We collect information about asset values, current estate planning documents, and goals for distribution and protection. This step sets the foundation for drafting a trust that aligns with the client’s priorities and helps identify any immediate coordination needs with other documents or beneficiaries.
We review the title and beneficiary forms for existing policies to identify any discrepancies that could undermine the ILIT’s purpose. This includes confirming the insurer’s requirements for ownership changes, assessing the timing of transfers to avoid estate inclusion, and advising on necessary notifications or consents. Clear documentation and proper execution of ownership transfer forms are essential to ensure the policy is held by the trust and that the trust’s beneficiary provisions control the disposition of proceeds.
A critical part of ILIT setup is designing a funding approach for premium payments that uses available annual gift exclusions, family contributions, or other methods in a way that avoids unintended tax consequences. We consider whether Crummey withdrawal notices or other mechanisms are suitable and prepare the trust to accept gifts and manage premium payments. This planning reduces the risk of coverage lapses and supports the long-term viability of the trust holding the policy.
In this phase we prepare the ILIT document tailored to the client’s goals and coordinate execution of the trust agreement with all parties. If transferring an existing policy, we work with the insurer to complete ownership change forms and ensure the trust is properly named and accepted. For new policies, we coordinate the trust purchase process so the trust is the owner and beneficiary from inception. We also assist with trustee acceptance forms and prepare templates for premium gift notices and records to document funding properly.
The trust document is signed and witnessed according to state law and the trustee formally accepts duties to administer the trust. Proper execution and acceptance by the trustee are necessary to establish clear legal ownership and authority. We provide instructions for recordkeeping, safe storage of the trust instrument, and steps to communicate the trust’s existence and duties to relevant family members and financial institutions, while preserving confidentiality where the client prefers privacy.
Working with the insurer to document the trust as owner and beneficiary requires precise forms and may involve underwriting or policy reassignment procedures. We assist in obtaining the carrier’s acceptance and ensure that beneficiary designations are aligned with the trust language. Confirming the carrier’s records accurately reflect the trust’s role prevents administrative complications and helps ensure the intended tax and distribution results are preserved at the insured’s death.
After the trust is formed and the policy is owned by the trust, ongoing administration includes managing premium payments, issuing gift notices if applicable, and keeping accurate records of all trust transactions. Trustees must follow the trust’s terms for investments and distributions and may need to prepare tax filings or reports if the trust holds other assets. Regular reviews are recommended to ensure the ILIT remains aligned with changing family circumstances and financial goals, and to update related documents like wills and powers of attorney as needed.
Trustees should maintain thorough records of premium payments, gifts to the trust, communications with beneficiaries, and any trust expenses. Proper recordkeeping supports compliance with gift tax rules when funding the trust, documents the source of premium payments, and helps clarify the trust’s administration during a claim. Clear administrative procedures reduce the likelihood of disputes and facilitate a smooth claims process when the insured’s policy matures to a death benefit payable to the trust.
Life events such as births, deaths, divorces, or significant changes in asset values may require updates to the ILIT or related estate planning documents. Periodic reviews ensure that beneficiary designations remain consistent, trustee appointments remain appropriate, and funding strategies continue to meet financial and tax planning goals. We recommend scheduled reviews to confirm the ILIT remains an effective component of the overall plan and to make any needed adjustments to respond to new circumstances or legal changes.
An Irrevocable Life Insurance Trust is a trust created to own a life insurance policy and manage its proceeds according to the trust terms. Once the trust owns the policy and the grantor no longer retains incidents of ownership, the death benefit is generally kept outside the grantor’s taxable estate, provided the transfer and timing rules are satisfied. The trustee administers the policy, ensures premiums are paid, and distributes proceeds to beneficiaries in accordance with the trust provisions, which can include staged payouts and protections. To make an ILIT effective, the trust must be properly funded and owned by the trustee rather than the insured. Clear documentation of the transfer or of the trust purchasing the policy is essential, as is careful coordination with the insurance carrier and beneficiary designations. Trustees must maintain records of premium funding and follow the trust’s procedures for distributions to minimize the risk of unintended tax consequences or inclusion in the taxable estate.
Transferring a life insurance policy into an ILIT can remove the death benefit from the taxable estate if done correctly and if the insured does not retain any incidents of ownership at death. Timing matters; transfers made within a certain period before death may still be included in the estate under applicable rules, and therefore must be planned with attention to legal timing and documentation. An ILIT can be a tax planning tool, though its effectiveness depends on the overall estate profile and how the transfer is executed. Because tax laws and thresholds can change, the potential estate tax savings of an ILIT are scenario-dependent. It is also important to coordinate the ILIT with other planning measures, such as beneficiary designations and asset titling, so that the trust preserves the intended benefits without creating gaps or conflicts. Regular review ensures that newly acquired assets or changes in family circumstances do not unintentionally alter tax outcomes.
Premiums for an ILIT are commonly funded through gifts to the trust using annual gift tax exclusions or through contributions from family members designated for that purpose. The use of withdrawal notices, often called Crummey notices, can allow the gifts to qualify as present interest gifts for the annual exclusion. Documentation of the gift, timely notice to beneficiaries where required, and careful tracking of payments are important to support the intended tax treatment. Another approach is to use other assets to fund premiums through ongoing gifts or life insurance funding arrangements. Whatever method is chosen, administrators must ensure that funding strategies are documented and that the trustee has clear authority to accept and apply gifts to premiums. This avoids the risk of coverage lapses and supports the ILIT’s long-term viability.
Trustee selection should prioritize reliable administration, recordkeeping, and the ability to follow the trust’s instructions impartially. Trustees can be a trusted family member, a professional fiduciary, or a financial institution, depending on the complexity of administration and the grantor’s comfort level with delegating responsibilities. Naming successor trustees provides continuity in case the initial trustee cannot serve, ensuring the ILIT remains managed according to its terms. The trustee’s duties may include paying premiums, keeping detailed records, issuing any required notices, and handling claims upon the insured’s death. The trust document should clearly outline trustee powers, compensation if any, and processes for successor appointment to reduce ambiguity and potential disputes among beneficiaries during administration.
Because an ILIT is irrevocable by design, changes after creation are limited and generally depend on the trust’s terms and applicable law. Modifications may be possible in certain circumstances through mechanisms specified in the trust agreement, by consent of all beneficiaries, or by court action in limited situations. Grantors should understand that the trust’s irrevocable nature is what enables many of its intended tax and protective benefits, so changes should be considered carefully. Regular reviews prior to trust execution and careful drafting are the best ways to anticipate future needs while preserving the trust’s purpose. If circumstances change significantly, alternative strategies outside the ILIT, such as other trusts or estate planning tools, may be used in conjunction with or as a complement to the ILIT to address new objectives without undermining the original structure.
An ILIT operates alongside other estate planning documents like revocable living trusts and wills. A revocable trust or will typically addresses disposition of assets that are part of the probate estate or the living trust, while the ILIT controls the disposition of insurance proceeds. Coordination is important so that beneficiary designations and trust terms do not conflict, and so that the overall plan reflects the grantor’s objectives for all assets. Because an ILIT is irrevocable, its terms should be consistent with the grantor’s broader estate plan at the time of formation. Communication between those drafting the ILIT and those preparing other estate documents helps ensure that the ILIT complements rather than contradicts distribution plans, which reduces the risk of litigation or unintended consequences for heirs and trustees.
If premium payments stop, a policy held by an ILIT can lapse, be reduced in face value, or be converted according to the policy’s terms, which can defeat the intended planning outcome. It is essential to have a reliable funding plan and to keep accurate records of premium gifts or trust-funded payments. Trustees should monitor premium schedules, maintain communications with those contributing funds, and act promptly to prevent lapses in coverage. Contingency provisions in the trust can address alternative funding sources, instructions for using trust assets if available, or steps to handle carrier-required changes. Establishing reserve funding methods and clear trustee authority helps ensure continuity of coverage needed to secure the policy’s benefits for beneficiaries.
Business owners often use ILITs as part of succession planning to provide liquidity for buy-sell agreements or to ensure that business interests are not unduly disrupted by estate tax obligations. When integrating an ILIT into business planning, it is important to coordinate the trust’s terms with business agreements, shareholder or partnership documents, and valuation arrangements. Consistency among these instruments preserves business continuity and aligns the use of proceeds with the owner’s succession goals. Careful attention must be paid to funding methods, beneficiary designations, and any corporate or partnership consent required to avoid conflicts. A comprehensive review of business succession documents alongside the ILIT ensures the life insurance proceeds are available to support agreed transitions and do not create unintended administrative or tax complications.
Crummey withdrawal rights give beneficiaries a temporary right to withdraw contributions to the ILIT, which can allow those contributions to qualify as present interest gifts for annual exclusion purposes. In practice, trustees send written notices to beneficiaries informing them of the gift and the short period during which they may exercise the withdrawal right. The method and timing of these notices must be consistent and well-documented to support the tax treatment. Most beneficiaries do not exercise the withdrawal right, allowing the gifts to remain in the trust for premium payments. Still, trustees must follow the process carefully, maintain records of notices and any actions taken, and consult guidance when structuring these rights to ensure they meet the requirements for annual gift tax exclusions.
ILITs and related estate planning documents should be reviewed periodically and after major life events such as births, deaths, marriages, divorces, significant changes in assets, or changes in tax law. Regular reviews ensure beneficiary designations align with the trust, trustee appointments remain appropriate, and funding strategies continue to be effective. Proactive reviews reduce the risk of unintended outcomes and provide an opportunity to adjust funding methods or trustee instructions in response to new circumstances. A review may reveal the need to update related estate documents, coordinate retirement plan beneficiary designations, or modify funding practices to ensure continued protection and alignment with the grantor’s goals. Scheduling periodic check-ins helps maintain the integrity of the ILIT and the broader estate plan over time.
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