An irrevocable life insurance trust (ILIT) is a powerful estate planning tool that can help Claremont residents preserve life insurance proceeds for beneficiaries while removing those proceeds from the taxable estate. Creating an ILIT involves legal steps to transfer ownership of a life insurance policy to a trust that cannot be revoked by the grantor, helping minimize estate tax exposure and control how and when beneficiaries receive proceeds. This opening overview explains common reasons families choose an ILIT and what to expect during the planning process with a local estate planning law office.
People often consider an ILIT when they want to protect life insurance proceeds from estate taxes, creditors, or potential misuse, while maintaining precise distribution terms. The trust can provide liquidity to pay taxes, support minor children, fund a family business transition, or provide long-term care for a loved one. Establishing an ILIT requires careful drafting, selection of trustees and beneficiaries, and coordination with insurance carriers. This paragraph outlines how the ILIT integrates with other estate planning documents such as wills, powers of attorney, and health care directives to form a comprehensive plan.
An ILIT can deliver multiple benefits when tailored to a family’s goals. It can remove life insurance proceeds from the grantor’s estate for estate tax purposes, ensure dedicated funds are available to cover estate taxes and final expenses, and protect distributions from creditors or remarriage. It also allows the grantor to specify timing and conditions for beneficiary access, which can be helpful for young beneficiaries or those with special financial needs. Proper administration and funding are essential to realize these benefits, and careful drafting helps prevent unintended tax consequences or estate disputes.
The Law Offices of Robert P. Bergman serve clients across California, including Claremont, with a focus on practical estate planning solutions like ILITs. The firm works closely with clients to design trust provisions that reflect family priorities, coordinate with life insurance carriers, and handle trust administration tasks. Attorneys at the firm emphasize clear communication, careful drafting, and a collaborative approach with financial professionals to ensure each ILIT fits within the broader estate plan. The team provides personalized attention to help clients understand tradeoffs and next steps during implementation.
An ILIT is a trust created to own life insurance policies and hold proceeds for beneficiaries under terms set by the grantor. Once the trust owns the policy, the grantor typically gives up direct control over the policy and its cash value, which can help remove proceeds from the taxable estate. Funding and timing rules are important: transferring an existing policy or naming the trust as owner of a new policy requires specific documentation, and gifts to the trust may be needed to pay future premiums. Proper administration after the grantor’s death ensures proceeds are distributed according to the trust terms.
Different structures and clauses in an ILIT address distinct planning goals. For example, trust provisions can permit staggered distributions, restrict access for beneficiaries with creditor exposure, or provide irrevocable instructions for use of funds. Trustee selection is important because trustees will manage the trust, handle premium payments when needed, and distribute proceeds. Since the trust is irrevocable, changes after creation are limited, so careful planning up front is essential. Coordination with retirement planning and other estate planning tools helps avoid overlaps and unintended tax or legal consequences.
An irrevocable life insurance trust is a legal entity that holds life insurance policies for the benefit of named beneficiaries. The grantor transfers ownership of a policy into the trust, or the trust is designated as the owner and beneficiary of a new policy. Because the grantor no longer owns the policy, the death benefit is usually excluded from estate taxable value. The trust document governs how proceeds are managed and distributed, who serves as trustee, and what powers the trustee has. Proper drafting prevents challenges and aligns distributions with the grantor’s intentions for family support and tax planning.
Creating an ILIT involves drafting a trust document, choosing a trustee, transferring ownership of an insurance policy or buying a new policy through the trust, and establishing funding mechanisms to ensure premiums are paid. Important clauses often cover distribution schedules, trustee powers to invest and manage assets, and provisions that address potential disputes among beneficiaries. For existing policies, assignments to the trust and carrier paperwork must be completed. Consideration of gift tax rules, three-year rule timing for transfers, and coordination with other estate planning documents is a vital part of the process.
Understanding common terms helps clients make informed decisions. The glossary below explains frequently encountered words and phrases related to ILITs so you can better follow planning discussions. Definitions cover trust ownership, beneficiary designations, taxable estate considerations, trustee roles, and the administrative processes that follow policy transfers and deaths. Clear definitions reduce confusion and support collaboration with financial and insurance advisors when forming or funding an ILIT.
The grantor is the person who creates the ILIT and transfers ownership of the life insurance policy into the trust. The grantor sets the trust’s terms and selects beneficiaries and trustees. Once ownership is transferred into an irrevocable trust, the grantor generally relinquishes direct control over the policy. The grantor may provide initial funding to cover premiums or establish a mechanism for making gifts to the trust. Careful planning before transfer helps ensure the grantor’s intentions are reflected in the trust and that potential tax consequences are addressed.
The trustee manages the ILIT, handles administrative duties, and follows the trust’s distribution instructions for beneficiaries. Responsibilities include paying premiums if the trust holds that obligation, managing trust assets, filing tax returns if required, and distributing proceeds according to the trust terms after the insured’s death. Trustees act in a fiduciary capacity and must adhere to the trust document and applicable law. Selecting a trustee who understands financial administration and family dynamics helps ensure that funds are handled according to the grantor’s intentions.
Irrevocability means the trust cannot be changed or revoked by the grantor after it is properly executed and funded, except as allowed by the trust terms or by applicable law. This permanence is what allows life insurance proceeds to be removed from the grantor’s estate for tax purposes. However, it also means modifications are limited, so careful foresight is necessary at creation. Some trusts build in limited powers or provisions for trust protectors or successor trustees to handle unforeseen events without undermining the trust’s intended tax or protective benefits.
Crummey powers are commonly included in ILITs to allow beneficiaries a temporary right to withdraw gifts made to the trust so those gifts qualify for the annual gift tax exclusion. This mechanism helps fund the trust to pay insurance premiums without triggering gift taxes. The trustee must provide notice of the withdrawal right and follow rules for a limited period. Properly structured Crummey provisions and timely administration help ensure premium gifts are treated correctly for tax purposes while preserving the trust’s intended protections for insurance proceeds.
Families often compare ILITs to leaving a policy outright to beneficiaries or using other trusts to accomplish estate planning goals. An ILIT offers specific advantages for removing insurance proceeds from the estate and controlling distributions, while leaving a policy to a beneficiary provides simplicity but may produce less control and greater estate tax exposure. Other trust options may address different goals such as asset protection, incapacity planning, or care for dependents with special needs. Evaluating how an ILIT fits with wills, living trusts, and powers of attorney is part of developing a tailored plan.
For individuals whose estates fall well below federal and state estate tax thresholds, the administrative complexity of an ILIT may not be necessary. In such cases, naming beneficiaries directly on the life insurance policy or using a revocable living trust to manage distributions may provide sufficient protection and ease of administration. Simpler approaches reduce ongoing administrative duties and avoid irrevocable transfers. A focused review of current estate tax liability, family needs, and financial plans helps determine whether a limited approach meets the client’s goals without unnecessary complexity.
If circumstances call for flexibility and the grantor expects to change beneficiaries or adjust policy ownership, a revocable or direct ownership approach may be preferable. Because ILITs are generally irrevocable, their permanence can be a disadvantage for those who anticipate significant life changes. For families needing immediate flexibility, retaining ownership of the policy with beneficiary designations or using revocable trusts can provide adaptable solutions. Planning should assess both current goals and likely future changes before choosing an irrevocable structure.
A comprehensive approach is often warranted when families face complex tax exposure, blended family dynamics, business succession concerns, or potential creditor claims. An ILIT can be tailored to address those intersecting needs through carefully drafted distribution provisions, trustee powers, and coordination with other estate planning documents. In these situations, detailed planning reduces the risk of disputes and helps ensure that life insurance proceeds fulfill intended purposes such as liquidity for taxes, business continuity, or long-term care funding for vulnerable beneficiaries.
When policy ownership changes, premium funding, and tax treatment are at stake, coordination with financial advisors and insurance carriers is important. A comprehensive service includes assistance with carrier paperwork, funding strategies to pay premiums without unintentionally creating taxable events, and instructions for trustees to follow after a death. This teamwork reduces administrative errors, ensures the trust is properly funded, and helps match the trust design to broader financial objectives. Clear communication among all parties supports the effective operation of the ILIT over time.
A comprehensive ILIT plan aligns insurance ownership, trustee selection, distribution timing, and ancillary documents to meet family goals. This approach reduces the risk of unintended tax consequences, ensures premium funding is sustainable, and clarifies the trustee’s powers for investment and distributions. It also integrates with incapacity planning and beneficiary protections, which can help preserve funds for intended uses. By addressing both legal and practical administration steps up front, families gain greater predictability about how life insurance proceeds will support loved ones during transition periods.
When the plan is comprehensive, trustees receive clear instructions and beneficiaries have well-defined entitlements, which can lower the chance of family disputes and administrative delays. Ongoing administration processes such as filing trust tax returns, handling premium payments, and communicating notice obligations are organized before they become urgent. Comprehensive planning also considers contingencies like the grantor predeceasing a trustee or changes in financial circumstances, so mechanisms are in place to handle those events consistently with the grantor’s objectives.
One core benefit of an ILIT is reducing estate tax exposure by excluding life insurance proceeds from the taxable estate once properly transferred and timed. This exclusion can provide immediate liquidity to pay estate taxes and final expenses without requiring the sale of assets. When combined with a coordinated plan for other estate components, the ILIT supports orderly settlement of the estate and preserves family assets. Careful timing and administration ensure the trust achieves these results while complying with tax rules and carrier practices.
An ILIT permits the grantor to dictate distribution schedules and conditions, protecting beneficiaries from creditor claims, impulsive spending, or problems in blended family situations. Trustees are instructed to manage proceeds in line with the grantor’s priorities, such as funding education, supporting a surviving spouse, or providing for children over time. These built-in controls reduce the likelihood of disputes and ensure that the policy proceeds are used for intended purposes, offering long-term stewardship for funds that beneficiaries might otherwise receive as a lump sum.
Before creating an ILIT, take time to determine who will benefit from the trust and how distributions should be structured. Consider ages, financial maturity, creditor exposure, and any specific needs such as support for a surviving spouse, education funding for children, or long-term care for a dependent. Defining these goals clearly guides selection of trustee powers and trust clauses, and makes it easier to coordinate policy ownership changes and premium funding. A clear plan reduces ambiguity and supports smoother administration when the trust becomes operational.
Selecting a trustee who understands fiduciary duties, recordkeeping, and the practical steps of trust administration promotes continuity and accountability. Trustees may need to handle premium payments, give Crummey notices when gifts are made to the trust, file necessary tax returns, and manage distributions after the insured’s death. Consider naming successor trustees to address future changes, and provide guidance in the trust document about allowable investments and distribution standards. Good trustee selection reduces administrative hurdles and helps ensure beneficiary needs are met responsibly.
Families consider ILITs for multiple reasons including estate tax mitigation, preserving life insurance proceeds for intended beneficiaries, and providing liquidity to pay taxes and final expenses without selling assets. The trust can protect proceeds from creditors or divorcing spouses and provide structured distributions for younger or financially inexperienced beneficiaries. For business owners, an ILIT can fund buy-sell agreements or ensure continuity. Reviewing family circumstances, estate size, and long-term objectives helps determine whether an ILIT aligns with your planning priorities in Claremont and throughout Los Angeles County.
Other motivating factors include a desire to leave a legacy in a controlled way, protect assets for heirs with special needs, or coordinate with retirement planning to manage tax exposure. Some clients also value the certainty that an irrevocable arrangement brings to protecting insurance proceeds from estate inclusion or creditor claims. Because an ILIT limits the grantor’s control over the policy, it is most appropriate when the goals are long-term and the grantor does not anticipate needing to change ownership or beneficiary arrangements frequently.
An ILIT is commonly used by individuals with larger estates facing potential estate tax exposure, business owners needing liquidity planning, families with blended relationships, and those concerned about creditors or future divorces affecting beneficiaries. It is also useful for parents of minor children or those caring for beneficiaries with special needs who require structured distributions. When an estate plan calls for reliable funding to meet obligations at death or for staged distributions, an ILIT can provide tailored solutions that other planning tools may not readily achieve.
When an estate may be large enough to face federal or state estate taxes, life insurance held in an ILIT can provide necessary liquidity to pay taxes without forcing asset sales. This use helps protect family assets and enables orderly administration of the estate. Families often prefer the predictability of insurance proceeds when cash is needed quickly after a death, and an ILIT ensures those funds are allocated according to the grantor’s plan rather than potentially being absorbed into the taxable estate.
In situations where beneficiaries may face creditor claims or future marital dissolution, an ILIT can offer an added layer of protection by holding proceeds inside a trust with distribution controls. The trust’s terms can limit beneficiaries’ direct access and reduce the risk that proceeds will be available for creditors. While rules vary, properly structured trusts can provide meaningful protection and ensure funds are used for intended purposes, such as family support or education, rather than being exposed to outside claims.
When beneficiaries are minors or individuals with special needs, an ILIT provides a structured mechanism for protecting funds and ensuring distributions are managed by a trusted fiduciary. The trust can include instructions for education, health care, housing, or supplemental support without disrupting public benefit eligibility where appropriate. Naming a reliable trustee and detailing distribution conditions allows the grantor to provide long-term financial security for vulnerable beneficiaries while preventing misuse or premature depletion of assets.
The Law Offices of Robert P. Bergman serve Claremont and surrounding communities, offering ILIT planning and related estate planning services. The firm assists with trust drafting, policy transfers, trustee selection, and coordination with financial and insurance professionals. Clients receive clear guidance on timing and funding mechanics, notice requirements, and administration steps after a death. The goal is to provide a practical, well-documented plan that reflects each client’s objectives for protecting life insurance proceeds and ensuring confident administration of the trust over time.
The firm focuses on helping clients in California craft durable estate plans that include ILITs when appropriate. Attorneys take a methodical approach to identify planning priorities, draft clear trust provisions, and coordinate policy transfers and premium funding. They communicate plainly about tradeoffs, timing rules, and administrative responsibilities, ensuring clients understand the steps required to achieve their goals. The practice emphasizes working with clients and their advisors to design plans that match family circumstances and long-term objectives in a practical manner.
Services include preparing trust documents, assisting with life insurance carrier requirements, advising on trustee duties, and guiding beneficiaries through the administration process after the insured’s death. The firm also reviews related estate documents such as wills, powers of attorney, and health care directives to ensure consistency across the plan. This coordinated approach reduces the risk of conflicts between documents and helps ensure life insurance proceeds are used as intended and administered efficiently.
Clients receive hands-on support in implementing the plan, including preparing assignment forms for existing policies, drafting Crummey notice language if needed, and providing clear checklists for trustees. The firm’s practical orientation helps clients complete necessary steps with carriers and financial professionals, making the transition from planning to funded trust as seamless as possible. Ongoing administration questions and successor trustee arrangements are addressed so families feel confident that the ILIT will function properly when needed.
Our process begins with a goal-focused consultation to understand family circumstances, estate size, and objectives for life insurance proceeds. We then recommend whether an ILIT or alternative approach best matches those goals, draft a trust tailored to client needs, and coordinate the transfer or issuance of insurance policies. The firm guides clients through funding mechanisms for premiums, prepares necessary notices, and provides trustee instructions for administration. Throughout the process, we prioritize clarity and practical steps so clients know what to expect and how to complete required actions.
The first step is a comprehensive review of assets, existing insurance policies, beneficiary designations, and family dynamics to identify objectives and constraints. We discuss estate tax exposure, liquidity needs, and the intended use of life insurance proceeds. This conversation informs whether an ILIT is appropriate and what funding approach will work. Clear goal setting early in the process ensures that the trust document is drafted to reflect the client’s priorities and reduces the likelihood of revisions or unintended consequences later.
We review existing estate planning documents, policy contracts, and beneficiary designations to identify conflicts and plan for necessary transfers. This inventory process includes evaluating whether existing policies should be transferred into an ILIT or replaced with policies issued to the trust. Reviewing asset titles, retirement accounts, and business interests clarifies the overall estate plan and helps coordinate the ILIT with other planning tools. A thorough review prevents surprises during implementation and ensures consistent estate planning results.
We discuss who will benefit from the trust, appropriate distribution timing, and the selection of trustees and successor trustees. Conversations include beneficiaries’ ages, financial maturity, special needs, or creditor concerns. Choosing a trustee who can handle administration duties and drafting provisions that reflect distribution priorities are critical decisions made during this phase. We provide guidance on trustee responsibilities and language that supports practical administration while aligning with client goals.
After goals are established, we prepare the ILIT document and related paperwork for transferring or issuing the life insurance policy. This step includes drafting Crummey notice language if gifts will be made to pay premiums, preparing assignment forms for existing policies, and coordinating with carriers on ownership changes. We also discuss funding strategies to ensure premiums are paid without adverse tax effects. Clear instructions and checklists are provided to help clients and trustees complete necessary administrative tasks.
We draft a trust document that sets out distribution terms, trustee powers, and contingency provisions. When gifts are used to pay premiums, we prepare notice language and procedures for Crummey withdrawals so gifts qualify for the annual exclusion. The trust document also addresses successor trustees, investment authority, and reporting responsibilities. Attention to these details reduces administrative friction and helps preserve the intended tax and protective benefits of the ILIT.
We work with the client and their insurance carrier to complete required ownership transfer forms or to issue a new policy owned by the trust. Coordination includes confirming beneficiary designations, ensuring the carrier accepts the trust as owner and beneficiary, and clarifying any carrier requirements for premium payments. We advise on funding strategies and provide guidance on required notices and timing to avoid unintended tax consequences or policy lapses during the transition.
Once the ILIT is funded and in place, the firm assists with administrative matters such as providing templates for Crummey notices, advising trustees on premium payments and recordkeeping, and reviewing the trust periodically to confirm it still aligns with the client’s goals. We also help prepare for trustee transition and answer questions about distributions. Periodic review ensures that the ILIT remains effective as laws or family circumstances change, and it helps maintain the plan’s intended protective and tax benefits over time.
We provide trustees with guidance on duties including notice procedures, premium payments, investment of trust assets, and distribution protocols. Trustees receive practical instructions on maintaining records, responding to beneficiary requests, and interacting with financial institutions. This assistance reduces administrative errors and supports compliance with trust terms. Clear recordkeeping practices also facilitate tax reporting where necessary and make it easier to account for trust activities over time.
Although the ILIT is irrevocable, periodic reviews are important to confirm that trustee appointments, funding arrangements, and related estate documents remain aligned with the client’s goals. We recommend reviewing coordination with wills, powers of attorney, and retirement plan beneficiary designations to avoid inconsistencies. If changes in law or family circumstances make updates advisable, we discuss options such as successor trustee appointments or supplemental planning documents to address new needs without undermining the ILIT’s intended benefits.
An irrevocable life insurance trust is a trust created to own a life insurance policy for the benefit of named beneficiaries. The grantor transfers ownership of a policy into the trust or the trust is named as owner and beneficiary when a new policy is issued. Because the grantor gives up ownership, the proceeds are generally removed from the grantor’s taxable estate, subject to timing and funding rules. The trust document sets out how proceeds will be managed and distributed after the insured’s death, and it names the trustee responsible for administration. Establishing an ILIT involves drafting the trust, completing carrier paperwork to transfer ownership, and setting up a plan to fund premiums. Administration tasks include providing notice to beneficiaries when gifts are made to the trust if annual exclusion treatment is desired, and managing distributions after the insured’s death. The trust’s irrevocable nature means changes are limited, so careful planning and coordination with insurance and financial advisors are important to achieve desired tax and family outcomes.
An ILIT can help reduce estate tax exposure by removing the death benefit from the grantor’s taxable estate when ownership is properly transferred and the applicable timing rules are met. The most important timing issue is the three-year rule, under which proceeds may still be included in the estate if the grantor retains certain incidents of ownership or the transfer occurred within three years of death. Properly structured transfers and policies issued to the trust help avoid this inclusion and preserve the intended estate tax benefit. California does not have a separate state-level estate tax, but federal estate tax considerations still apply for larger estates. An ILIT’s value in tax planning depends on the size of the estate and other assets. Coordination with broader estate planning is necessary to evaluate whether an ILIT will achieve meaningful tax savings and to ensure other estate components are aligned to support the overall plan.
You can transfer an existing life insurance policy into an ILIT, but certain procedural steps must be followed to ensure the transfer achieves the desired legal and tax results. Assigning an existing policy to the trust requires completing assignment forms with the carrier and updating beneficiary designations as necessary. If the transfer occurs too close to the grantor’s death, the proceeds may still be included in the estate under timing rules. The decision between transferring an existing policy and issuing a new policy to the trust depends on policy terms, insurability, and carrier rules. Timing matters because transfers of ownership within three years of death can create inclusion issues if the grantor retained incidents of ownership. Clients should review policy contract terms, possible surrender charges, and insurability concerns before transferring an existing policy. Coordinating with insurance and legal advisors helps ensure the transfer is handled correctly and the ILIT is funded appropriately without inadvertently causing tax or coverage problems.
The trustee of an ILIT manages the trust, handles premium payments if required, files required notices, and distributes proceeds according to the trust document. Trustees have fiduciary responsibilities and must follow the trust’s instructions and applicable law. Many clients choose a trusted individual, a corporate fiduciary, or a combination of both to balance personal knowledge of the family with reliable administrative capacity. Naming successor trustees ensures continuity if the initial trustee cannot serve at a future date. Trustee duties include recordkeeping, responding to beneficiary requests, managing trust investments if necessary, and working with insurance carriers and financial professionals. Because the trustee plays a central role in making distributions and protecting trust assets, the trust should state clear authorities, standards, and procedures to guide trustee decisions. Practical trustee selection and clear drafting reduce the risk of disputes and administrative errors after the insured’s death.
When a policy is owned by the trust, the trust is responsible for paying premiums. Funding to the trust is commonly provided by gifts from the grantor, often structured to qualify for the annual gift tax exclusion through Crummey withdrawal rights. The trust can be drafted to accept premium gifts and authorize the trustee to use funds to pay the insurance carrier. Ensuring a reliable funding mechanism avoids policy lapses and preserves the intended benefits of the ILIT. Alternatives include making lump-sum contributions if funding allows, arranging for ongoing gifts, or structuring cash-flow strategies with financial advisors to support premium payments. The chosen funding method should consider tax consequences, the grantor’s cash flow needs, and carrier requirements. Clear procedures for delivery of funds and notice to beneficiaries are important to maintain compliance with gift tax rules and to protect the trust’s status for estate tax purposes.
Crummey notices are a mechanism used to qualify gifts to an ILIT for the annual gift tax exclusion by providing beneficiaries a temporary right to withdraw a portion of each gift. The trustee sends a notice to beneficiaries informing them of a limited window to exercise a withdrawal right, which supports treating the premium gifts as present interest gifts eligible for the exclusion. Proper notice and timing are required to substantiate the tax treatment and maintain the trust’s intended benefits. While many beneficiaries never exercise the withdrawal right, issuing notices preserves the donor’s ability to use annual exclusion amounts to fund premiums. The notice process should be documented and administered consistently. Trustees should follow the trust’s procedures for providing notice and maintaining records to demonstrate that gifts qualified for the exclusion in the event of IRS review.
Beneficiaries do not automatically receive trust proceeds directly; distributions occur according to the trust’s terms following the insured’s death. The trustee executes the trust provisions, manages proceeds, and distributes funds under the instructions set by the grantor. Distribution terms can be immediate lump sums, staged payments, or conditional distributions for specific purposes such as education or healthcare. This structure provides control over how and when beneficiaries receive funds and can protect assets from external claims. The trustee’s role includes ensuring beneficiary needs are met while complying with fiduciary duties and the trust document. If beneficiaries or trustees have questions about distributions, the trust may authorize procedures for dispute resolution or provide guidance on discretionary distributions. Clear drafting at the outset reduces ambiguity and supports timely, orderly distribution of proceeds in accordance with the grantor’s objectives.
Common pitfalls include failing to coordinate timing of transfers with the three-year rule, neglecting carrier procedures for ownership transfer, and not arranging reliable funding for premiums which can lead to policy lapse. Another frequent issue is failing to update related estate documents or beneficiary designations, creating inconsistencies that complicate administration. These errors can undermine the ILIT’s intended tax or protective benefits and result in unintended inclusion of proceeds in the estate or administrative disputes among beneficiaries. Addressing these pitfalls requires careful planning and administrative follow-through: review carrier requirements, confirm timing for transfers, document Crummey notices properly when used, and coordinate with financial advisors to fund premiums. Clear trustee instructions and successor trustee provisions help prevent administrative disruptions. Regular reviews of the plan ensure the ILIT continues to serve the grantor’s objectives as family or financial circumstances change.
An ILIT functions alongside other estate planning documents such as a last will and testament, revocable living trust, powers of attorney, and health care directives. Coordination is essential so that beneficiary designations on retirement accounts and insurance contracts do not conflict with trust objectives. A pour-over will can direct assets to a revocable trust, but life insurance owned by an ILIT follows the trust’s terms, making clear documentation important to avoid competing entitlements at death. Regular review ensures consistency among documents and avoids unintended consequences. For example, beneficiary designations on employer policies or retirement plans should be aligned with the ILIT strategy where appropriate. Reviews also address changes in family circumstances, changes to trustees, or updates to related documents so the entire estate plan works together to meet the grantor’s goals.
Costs vary based on the complexity of the trust, whether an existing policy is transferred, and the need for coordination with financial and insurance professionals. Setting up an ILIT typically involves legal fees for drafting the trust, preparing assignment or carrier forms, and advising on funding strategies. There may also be occasional administrative costs for trustee services, tax preparation, and recordkeeping. Discussing anticipated costs up front helps clients budget for both initial setup and ongoing administration expenses. Maintaining the trust includes routine administrative tasks such as sending Crummey notices, managing premium funding, and handling distributions after the insured’s death. Some trustees charge fees for their services, and periodic reviews by legal counsel may be advisable to confirm continued alignment with planning goals. The overall value is measured in how well the ILIT preserves intended benefits, protects proceeds, and provides liquidity for estate needs.
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