An Irrevocable Life Insurance Trust (ILIT) can play a key role in preserving wealth and ensuring that life insurance proceeds are managed according to your wishes. For families in Inglewood and across Los Angeles County, an ILIT helps separate life insurance benefits from a taxable estate and can provide liquidity to pay taxes, debts, and final expenses. This introductory overview explains what an ILIT is, how it functions in California planning, and why many clients incorporate this tool into broader estate plans such as trusts, wills, and healthcare directives.
Choosing to establish an ILIT involves thoughtful planning about beneficiaries, trustee selection, premium funding methods, and potential tax implications. Because an ILIT is irrevocable, once assets are transferred into the trust they are generally removed from the grantor’s estate, helping reduce estate tax exposure and clarifying distribution plans. This section introduces common components associated with ILITs, including trust language, gift tax considerations, and coordination with retirement and beneficiary designations to ensure life insurance proceeds achieve the intended estate planning outcomes.
An ILIT provides several practical benefits that align with careful estate planning goals. By holding life insurance outside of the grantor’s taxable estate, an ILIT can reduce potential estate tax exposure and provide immediate liquidity to cover settling costs without forcing the sale of business or personal assets. It also offers a structured mechanism to control how insurance proceeds are distributed to beneficiaries, protect funds from creditors, and preserve family wealth for long-term needs, including education or ongoing care. Implementing an ILIT requires coordination with other estate planning tools to ensure cohesive results.
The Law Offices of Robert P. Bergman provides estate planning and trust services to clients across California, including tailored guidance for life insurance trust matters. Our approach emphasizes clear communication, personalized plan design, and careful documentation of client intentions. We work to explain technical concepts in understandable terms so families can make informed decisions about trusts, wills, powers of attorney, and healthcare directives. Whether coordinating an ILIT with retirement assets or addressing beneficiary designations, we focus on practical steps to protect client interests and support long-term planning objectives.
An ILIT is a trust created to own one or more life insurance policies, with terms that govern how proceeds are managed and distributed after the insured person’s death. Because the trust is irrevocable, the grantor typically gives up control over the policy once it is transferred, which can have significant tax and legal consequences. Proper drafting ensures that the trust can receive premiums, hold the policy, and direct distributions to named beneficiaries. Understanding the mechanics of trusteeship, funding, and timing is essential to achieving the intended estate planning objectives.
Funding an ILIT can involve gifting cash to the trust for premium payments or having the trust purchase the policy outright. Each method carries different gift tax and generation-skipping planning considerations, and the timing of transfers matters for estate inclusion rules. Trustees have fiduciary responsibilities to act in beneficiaries’ best interests and to follow trust provisions regarding distributions, creditor protections, and spendthrift clauses. Effective planning coordinates the ILIT with wills, revocable trusts, powers of attorney, and health care directives to avoid unintended conflicts or gaps.
An ILIT is designed to own life insurance policies outside the grantor’s estate, with a trustee managing the policy and distributing proceeds according to trust terms. The trust document names beneficiaries, outlines distribution rules, and provides instructions for premium payments and trust administration. By design, the trust removes the policy’s death benefit from immediate estate inclusion when properly executed and funded. It also creates a legal framework for managing liquidity, protecting proceeds from creditor claims, and directing funds for specific purposes like education, support, or continued care.
Creating an ILIT typically involves drafting the trust agreement, selecting a trustee, transferring an existing policy or arranging for a new policy to be issued to the trust, and establishing a funding plan for premiums. The trust should specify distribution standards, powers granted to the trustee, and conditions under which proceeds are paid. Consideration must also be given to gift tax implications, the three-year rule for estate inclusion, and coordination of beneficiary designations on other accounts. Careful documentation and follow-up administration are essential to preserve the intended benefits.
Understanding common terms used in ILIT planning helps clients make informed decisions. The glossary below explains phrases such as grantor, trustee, beneficiary, gift tax, three-year rule, funding, and spendthrift provision. Familiarity with these concepts reduces confusion during drafting and administration and helps clients anticipate how an ILIT will interact with other estate planning documents. When questions arise about definitions or how terms apply to a specific situation, seeking clear legal guidance ensures that trust provisions align with personal goals and legal requirements.
The grantor is the person who creates the trust and transfers property or ownership of a life insurance policy into it. Once the transfer is completed and the trust is irrevocable, the grantor typically relinquishes direct control over the trust assets. The grantor’s actions in funding the trust and naming beneficiaries influence tax consequences and the trust’s effectiveness in removing assets from the grantor’s taxable estate. Clear intent and proper documentation at the time of transfer help ensure the trust operates as planned.
The trustee is the individual or entity responsible for managing the trust, making premium payments if required, and distributing proceeds according to the trust terms. Trustees have fiduciary duties to act in the best interests of beneficiaries, maintain accurate records, and follow instructions laid out in the trust document. Selecting a trustee requires consideration of administrative skills, availability, and the ability to act impartially. Trustees may be family members, trusted friends, banks, or professional fiduciaries depending on the complexity of the trust and the client’s preferences.
A beneficiary is a person or entity designated to receive trust assets or life insurance proceeds upon the insured’s death. In an ILIT, beneficiaries are named within the trust document rather than directly on the insurance policy, which allows for greater control over timing and conditions of distributions. Beneficiaries can include family members, charities, trusts for children or dependents, and other designated recipients. Clear beneficiary designations and aligned trust provisions help avoid disputes and ensure funds are used as intended.
The three-year rule refers to a provision in tax law that can include life insurance proceeds in the decedent’s estate if the insured transferred the policy within three years of death. To avoid unwanted estate inclusion, planning must consider the timing of transfers and funding strategies. Properly structuring transfers, documenting gifts, and aligning trust ownership with premium payment methods are important to reducing the risk that proceeds will be brought back into the taxable estate under this rule. Coordinating with broader estate planning steps helps mitigate such timing concerns.
Choosing between an ILIT and alternative strategies requires assessing goals such as tax reduction, creditor protection, and control over distributions. Unlike a revocable living trust or beneficiary designation directly on a policy, an ILIT separates insurance proceeds from the grantor’s estate and provides structured distribution rules. Other options may offer more flexibility but less protection from estate inclusion or creditor claims. Reviewing each approach in the context of family needs, asset mix, and long-term objectives helps determine which strategy best aligns with the client’s priorities.
For individuals with modest estates or uncomplicated family situations, simply naming beneficiaries on a life insurance policy may provide the necessary outcome. Direct beneficiary designations can be straightforward to implement and require minimal ongoing administration. This approach can deliver immediate proceeds to loved ones without the need for trust formation or ongoing trustee management. However, it offers less protection from estate claims and provides limited control over how proceeds are used, which can be acceptable in many straightforward circumstances.
If the primary concern is short-term liquidity to cover final expenses or immediate obligations, keeping a policy outside of a trust may simplify access for beneficiaries. Direct policy ownership or beneficiary designations avoid trust setup and administration, allowing funds to be paid quickly after death. That convenience can be beneficial when estate tax exposure is unlikely and creditor protection is not a priority. Before choosing this route, consider whether future changes in assets or family circumstances could alter the suitability of a limited approach.
A comprehensive approach aligns an ILIT with wills, revocable trusts, powers of attorney, healthcare directives, and beneficiary designations. Coordinated planning helps prevent conflicts, duplicates, or unintended consequences when documents contain inconsistent instructions. This integrated strategy clarifies decision-making authority for healthcare and financial matters, preserves intended distributions, and addresses potential tax or creditor issues. Developing a unified plan provides a clearer roadmap for family members and fiduciaries tasked with administration after the grantor’s passing.
Comprehensive planning allows for long-term strategies such as wealth preservation, multigenerational planning, and tax-aware transfer techniques. Integrating an ILIT with other trust vehicles like irrevocable life insurance trusts, retirement plan trusts, or special needs trusts can tailor distributions to beneficiary needs while managing tax exposure. A holistic review also considers changing laws, potential exposure to estate or generation-skipping taxes, and plans for durable decision-making in the event of incapacity. Thorough planning helps ensure that estate objectives remain aligned over time.
A comprehensive framework increases clarity, reduces the risk of disputes, and enhances the effectiveness of tools like ILITs by ensuring each document supports the others. This approach can preserve family wealth, protect beneficiaries from creditor claims, and reduce administrative complications after a death. It can also create mechanisms for managing funds for minors or vulnerable beneficiaries through trusts designed to limit immediate access while addressing long-term needs. Effective coordination across documents enhances predictability and supports the grantor’s intentions.
In addition to legal coherence, a comprehensive plan provides practical advantages such as streamlined administration, reduced probate exposure, and clearer guidance for fiduciaries. Combining an ILIT with wills, powers of attorney, and health care directives helps ensure that life insurance proceeds are used for their intended purposes and that decision-makers have authority to act when needed. Thoughtful implementation and ongoing review maintain alignment with changing circumstances and legal rules, offering families greater confidence that affairs will be managed responsibly.
One significant benefit of including an ILIT in a broader estate plan is removing life insurance proceeds from the grantor’s taxable estate when transfers are properly timed and documented. This can reduce estate tax exposure and limit the need to liquidate other assets to pay taxes or debts. Careful drafting and adherence to timing rules, including the three-year window, are necessary to secure this advantage. When aligned with other documents, an ILIT can be a powerful tool for preserving value for heirs and providing liquidity when it is most needed.
An ILIT enables grantors to specify how proceeds are distributed, establish staggered payments, and limit beneficiary access through trust provisions such as spendthrift protections. This is especially useful for young beneficiaries, individuals with special needs, or those who may face creditor exposure. The trustee follows the trust terms to administer funds responsibly and ensure distributions serve the beneficiary’s best interests. When combined with other planning tools, this level of control helps preserve family resources and reduce the chance of misuse or unintended depletion of assets.
Selecting a trustee who is trustworthy, organized, and able to manage premium payments and recordkeeping is essential for ILIT effectiveness. The trust language should clearly grant the trustee authority to receive gifts for premiums, manage the life insurance policy, and make distributions as intended. Consider naming successor trustees and including instructions for replacing a trustee to avoid administrative disruption. Well-crafted provisions address potential contingencies and reduce the likelihood of disputes or delays in trust administration.
Make sure beneficiary designations on retirement accounts, life insurance policies outside the ILIT, and other accounts align with trust provisions to avoid conflicts or unintended distributions. Coordinating wills, revocable trusts, powers of attorney, and healthcare directives ensures a cohesive plan for incapacity and after-death administration. Periodic reviews are advisable, especially after major life events like marriage, divorce, births, or changes in financial circumstances, to ensure all documents remain consistent with current goals and any legal changes that may affect planning choices.
Consider an ILIT when you want to keep life insurance proceeds out of your taxable estate, provide funded liquidity for debts and taxes, or exercise detailed control over how death benefits are used. Individuals with significant life insurance holdings, owners of closely held businesses, or those who anticipate estate tax exposure may benefit from placing policies into an ILIT. It can also serve families who want to protect proceeds from creditor claims or ensure structured distributions to minors or beneficiaries with special needs through tailored trust provisions.
An ILIT may also be appropriate when coordinating transfer strategies such as gift and generation-skipping planning. The trust supports multigenerational transfer objectives and can be combined with other trust vehicles to manage wealth across time. Before committing to an irrevocable structure, review possible alternatives, evaluate timing issues like the three-year rule, and confirm that the chosen trustee can meet administrative duties. Thoughtful planning and clear documentation increase the likelihood that the ILIT will achieve intended family and tax goals.
Typical circumstances that prompt clients to consider an ILIT include substantial life insurance ownership, planning to reduce estate tax exposure, protecting proceeds from creditors, and ensuringstructured distributions for heirs. Business owners may use ILITs to provide liquidity for succession planning or to equalize inheritances among beneficiaries. Families with minor children, those needing to provide for a relative with special needs while preserving public benefits, or individuals seeking to coordinate life insurance with retirement assets often find an ILIT helpful within a broader estate plan.
When a client owns significant life insurance policies that could increase estate value, an ILIT can remove the proceeds from estate inclusion when properly funded and timed. This helps reduce potential estate tax and preserves liquidity for heirs. Implementing an ILIT may also prevent forced sales of other assets to satisfy tax obligations by providing dedicated funds for those purposes. Proper legal and tax planning at the time of transfer is necessary to realize these outcomes and avoid unintended consequences.
Business owners who depend on life insurance to fund buy-sell agreements or provide capital for succession planning often use an ILIT to hold the policy separately from personal assets. The trust structure helps ensure the proceeds are available to support a business transition upon the owner’s death without increasing the estate’s taxable value. Clear trust provisions that align with the business succession plan and funding strategy make it easier to achieve orderly ownership transfers and maintain business continuity for surviving partners or family members.
Families seeking to protect beneficiaries who may be creditors, have limited financial experience, or require ongoing support often use ILITs to control timing and conditions of distributions. The trustee can manage proceeds to ensure payments cover education, living expenses, or medical needs while preventing outright lump-sum distributions that could be misused. Trust provisions such as spendthrift clauses or discretionary distribution standards provide safeguards that help preserve benefits for the intended purposes and promote long-term financial stability for beneficiaries.
We serve clients throughout Inglewood and Los Angeles County, offering guidance on ILIT setup, trust administration, and integrated estate planning strategies. Our team helps families structure policies, select trustees, and coordinate premium funding plans to meet individual needs. Whether you are reviewing an existing policy or considering a new trust-owned policy, we provide clear explanations of available options, timing considerations, and ongoing administrative responsibilities, ensuring that clients in the local community have access to dependable planning resources.
Clients work with our firm for personalized estate planning that seeks to align legal strategies with family goals and financial realities. We emphasize clear communication and careful drafting to help clients understand the implications of an irrevocable trust, including tax timing and trustee responsibilities. Our goal is to prepare durable documents that protect beneficiaries, provide liquidity, and integrate with wills, powers of attorney, and healthcare directives for a coherent plan.
We assist with practical steps such as transferring ownership of policies to the trust, documenting premium gifts, and preparing trustees for administrative duties. Our team helps prepare the necessary paperwork, coordinates with insurance providers, and advises on funding strategies that align with estate and tax planning goals. Ongoing review options are available to confirm that the ILIT and related documents remain appropriate as personal or legal circumstances change.
Our approach is client-centered, focused on explaining choices, preventing avoidable pitfalls, and documenting clear instructions to reduce the potential for disputes. We work to ensure trustees have the instructions and records needed to administer the trust faithfully and to help beneficiaries understand distribution terms. For clients in Inglewood and throughout California, we provide practical guidance aimed at preserving family wealth and supporting orderly transitions.
Our process begins with a thorough review of your assets, existing life insurance policies, beneficiary designations, and broader estate planning documents. We discuss goals for control, protection, and tax planning, then recommend whether an ILIT is appropriate and outline funding methods. The next steps include drafting the trust document, coordinating policy transfers or issuance, documenting premium gifts, and preparing trustee instructions. Post-creation administration guidance and periodic reviews help ensure the trust continues to meet changing needs and legal developments.
The initial meeting focuses on understanding family dynamics, financial circumstances, and the client’s objectives for life insurance proceeds. We review current policies, beneficiary designations, and related estate planning documents to determine how an ILIT would interact with existing arrangements. This step includes discussing trustee options, identifying potential tax considerations, and outlining practical administration responsibilities so clients understand the implications of transferring a policy into an irrevocable trust.
Collecting relevant documents such as life insurance policies, policy illustrations, beneficiary forms, trust and will documents, and financial statements enables a comprehensive assessment. This information helps identify funding needs, potential estate inclusion concerns, and coordination issues with other accounts. Accurate records also streamline drafting and help anticipate timing matters, such as gift tax reporting requirements and three-year rule considerations, so the trust can be structured to accomplish the intended planning goals.
During the initial consultation we clarify objectives like tax reduction, creditor protection, or controlled beneficiary distributions and identify constraints such as current health, policy terms, and family circumstances. Understanding these factors helps determine the most appropriate funding methods and trust provisions. We discuss trustee responsibilities and potential successor trustee arrangements to ensure continuity and readiness to administer the trust when necessary. This alignment minimizes surprises later in the process.
This phase involves preparing the ILIT document, coordinating the transfer of an existing policy to the trust or arranging for a new trust-owned policy, and establishing the premium funding method. Drafting should include clear trustee powers, distribution standards, and provisions for premium gifts. We guide clients through execution, notify insurance carriers as needed, and document funding transactions to preserve the trust’s intended tax and legal treatment. Proper execution and recordkeeping are essential for long-term effectiveness.
Finalizing the trust requires careful execution in accordance with state formalities and clear assignments or beneficiary changes with the insurance company. If transferring an existing policy, notifying the insurer and completing any required forms ensures the trust becomes the policy owner. If issuing a new policy, coordinating underwriting and trustee setup helps avoid administrative gaps. Proper documentation of these steps helps establish the intended ownership and supports future trust administration.
Create a sustainable plan to fund premiums, whether through recurring gifts, trustee payments, or other arrangements. Documenting gifts made to the trust and adhering to formal transfer procedures helps avoid unintended tax results. Consider contingency plans for missed payments and ensure trustees understand how to manage policy loans or premium funding options. A clear funding strategy helps maintain policy coverage, preserve the trust’s objectives, and reduce the likelihood of lapses that could undermine planning goals.
After the ILIT is established, the trustee must administer the trust, make premium payments if required, and follow the trust’s distribution instructions upon the insured’s death. Regular reviews of the trust and its coordination with broader estate planning documents help maintain alignment with changes in assets, beneficiaries, or laws. Periodic communication with trustees and beneficiaries, as well as updating related documents when circumstances change, preserves the integrity of the plan and ensures that the trust continues to meet its intended objectives.
Trustees are responsible for recordkeeping, premium payments, tax reporting if required, and following distribution instructions contained in the trust. They may also be called upon to coordinate with accountants, insurance carriers, and attorneys to address administrative tasks. Providing trustees with clear written instructions and documentation at the time of trust formation reduces administrative burdens and helps ensure timely fulfillment of fiduciary duties. Good communication between trustees and beneficiaries helps minimize confusion and disputes.
Circumstances such as births, deaths, marriages, divorces, changes in assets, or tax law updates may require revisiting the ILIT and related estate planning documents. Periodic reviews help confirm that the trust remains aligned with goals and that funding mechanisms continue to be adequate. Making timely updates to beneficiary designations and coordinating with wills or revocable trusts prevents unintended outcomes. Ongoing oversight preserves the intended structure and effectiveness of the ILIT for future needs.
An Irrevocable Life Insurance Trust is a trust created to own a life insurance policy for the benefit of named beneficiaries. The trust is irrevocable, meaning that once the policy or ownership interests are transferred, the grantor generally cannot reclaim the assets. The trustee manages the policy, makes premium payments if funded by the trust, and administers the proceeds according to the trust’s terms after the insured’s death. Structuring the trust properly is key to achieving goals such as removing proceeds from the grantor’s taxable estate and providing a controlled mechanism for distributions. Understanding the mechanics involves selecting a trustee, deciding on funding methods, and coordinating with other estate planning documents. Funding typically involves making gifts to the trust that the trustee then uses to pay policy premiums. The trust should include clear distribution provisions and address creditor protection and discretionary distribution standards. Because of timing rules and tax considerations, careful planning and documentation at the time of transfer are necessary to preserve the intended benefits and reduce the risk of unintended estate inclusion.
Yes, an existing life insurance policy can often be transferred into an ILIT, but the process requires careful coordination with the insurance carrier and careful documentation. The owner of the policy must execute an assignment or change the owner designation to the trust, and the insurer may require specific forms. If the insured transfers ownership within three years of death, estate inclusion rules may apply, so timing and recordkeeping are important. Working through the administrative steps helps ensure the transfer is recognized and that premium funding is maintained. Transferring an existing policy also raises questions about policy loans, surrender values, and potential gift tax consequences. If the policy has a cash value, the transfer may be treated as a gift and could require reporting. The trustee must understand how to manage the policy after transfer, including paying premiums and handling any loans. Consulting about the specific policy terms and tax reporting obligations helps avoid surprises and makes the transition smoother for trustees and beneficiaries.
When a life insurance policy is owned by an ILIT, beneficiary designations are typically controlled through the trust document rather than listed directly on the insurance company’s beneficiary form. This arrangement gives the grantor the ability to structure distributions according to the trust terms, which can include staggered payments, distributions for education, or protections for vulnerable beneficiaries. Because ownership rests with the trust, changing beneficiaries usually requires modifying the trust or following the trust’s amendment provisions, which may be limited by the irrevocable nature of the arrangement. If flexibility to change beneficiaries is important, discuss available alternatives and whether a revocable structure or a different planning tool better suits your needs. In some situations, third-party ownership arrangements or contingent beneficiary designations can preserve some adaptability. However, these routes may not afford the same protections from estate inclusion or creditor claims, so evaluating the trade-offs is essential before proceeding with an irrevocable trust.
The three-year rule can bring life insurance proceeds back into the insured’s estate if the insured transferred policy ownership within three years of death. This rule is intended to prevent last-minute transfers designed solely to avoid estate inclusion. To avoid unintended estate inclusion, transfers should be made with sufficient lead time and with clear documentation showing the grantor’s intent. Planning around this timing rule is an important aspect of ILIT design and funding strategies. If the three-year period is a concern, alternative techniques and careful timing may mitigate risks. In some cases, life insurance can be purchased and owned by the trust from the outset, or other funding strategies can be used to reduce exposure. A thorough review of timing, policy terms, and the client’s overall estate picture is necessary to select the best approach while remaining mindful of tax consequences and administrative requirements.
Choosing a trustee involves balancing trustworthiness, administrative ability, and availability to handle ongoing tasks such as premium payments and recordkeeping. Individuals, family members, professional fiduciaries, or financial institutions can serve as trustees depending on the complexity of the trust and the level of professional administration desired. The trustee should be someone who can act impartially, maintain accurate records, and follow the trust’s distribution instructions, with provisions for successor trustees included in the trust document. Discuss the trustee’s role in depth before appointment, including potential compensation, powers granted in the trust instrument, and how disputes will be handled. Providing clear written instructions and access to necessary documents at the time of formation reduces administrative burdens and helps ensure the trustee can perform duties effectively. Consider backup plans and successor trustee arrangements to maintain continuity if circumstances change.
Funding an ILIT typically involves making gifts to the trust so the trustee can pay insurance premiums, and these gifts may be subject to gift tax reporting depending on size and frequency. Annual exclusion gifts may be used for premium payments when structured properly and documented, and larger transfers could require filing a gift tax return or utilize a portion of the grantor’s lifetime gift tax exemption. Proper planning and documentation help manage reporting requirements and preserve desired tax results. There are also income tax and estate tax considerations to evaluate. Properly structured transfers can remove proceeds from the grantor’s taxable estate, but missteps in timing or documentation could cause inclusion. Trustees and grantors should maintain clear records of gifts and premium payments. Consulting about tax filings, gift strategies, and timing helps ensure the ILIT funding aligns with the client’s overall estate and tax planning goals.
ILITs are primarily designed for life insurance ownership and may not directly shelter assets for Medicaid qualification, which is governed by specific look-back periods and rules for long-term care benefits. Because ILITs are irrevocable, transferring assets could affect eligibility depending on timing and the nature of transfers. Planning for Medicaid and long-term care typically requires advance steps and careful coordination with trusts or other asset protection techniques to avoid unintended disqualification from benefits. If long-term care planning is a concern, consider integrating ILIT planning into a broader strategy that addresses Medicaid look-back rules and asset protection approaches. Combining different trust vehicles, timing transfers appropriately, and reviewing eligibility rules can help align life insurance planning with long-term care objectives. A deliberate plan that considers both benefits and timing reduces the risk of adverse outcomes while preserving liquidity for future needs.
An ILIT can enhance protection of insurance proceeds from creditor claims when structured with appropriate spendthrift provisions and trust terms. By owning the policy and directing distributions through the trust, an ILIT may reduce direct exposure to certain creditors of beneficiaries. However, protections vary depending on state law, the nature of the creditor claim, and whether transfers were made to avoid known creditors. Clear drafting and prudent timing mitigate some risks related to creditor challenges. While an ILIT provides an additional layer of protection, it is not a blanket shield in every circumstance. Creditors with valid claims may pursue remedies depending on the facts, and transfers made to hinder creditors can be subject to challenge. For clients with significant creditor risk, combining trust design with appropriate legal strategies and timing considerations improves the likelihood that proceeds remain available for intended beneficiaries.
If a trustee fails to pay premiums and a policy lapses, the trust may lose the intended coverage and the planning benefits associated with owning the policy within the ILIT. This outcome can undermine estate liquidity plans and lead to unexpected gaps in funding for beneficiaries. Having clear trustee instructions, contingency provisions for missed payments, and a plan for alternative funding helps reduce the chance of such failures and protects the trust’s objectives. Including mechanisms such as reserve funds, successor trustee authority to borrow or access funds for premiums, or explicit guidance on premium payment priorities can mitigate the risk of lapse. Regular communication between the grantor, trustee, and other advisors, along with documented funding arrangements, promotes continuity of coverage. Prompt corrective steps are essential if a premium payment issue arises to restore coverage or pursue alternative solutions.
Review your ILIT and related estate planning documents periodically and after significant life events such as births, deaths, marriages, divorces, or major changes in assets. Regular reviews ensure that the trust’s provisions remain aligned with goals and that funding mechanisms, trustee selections, and beneficiary designations continue to reflect current circumstances. Laws and tax rules may also change over time, so periodic reassessment helps preserve intended outcomes and adapt to new legal developments. Scheduling routine reviews every few years or sooner when circumstances change provides a proactive framework for maintenance. During reviews, verify that the trust documents are accessible, confirm funding arrangements are functioning as intended, and update coordination with wills, healthcare directives, and powers of attorney. Consistent oversight reduces the likelihood of unintended outcomes and helps ensure the ILIT remains an effective part of the overall estate plan.
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