An Irrevocable Life Insurance Trust (ILIT) can be an effective tool for managing life insurance proceeds, minimizing estate tax exposure, and ensuring that your beneficiaries receive funds according to your wishes. This page explains how an ILIT works, the typical circumstances in which it is used, and what to expect when creating and funding one. Whether you are planning for a blended family, seeking tax-efficient wealth transfer, or protecting assets for a dependent, understanding the role of an ILIT helps you make informed decisions tailored to your needs and the laws of California.
Choosing to establish an ILIT involves important planning steps, ongoing administration duties, and careful coordination with life insurance policies and other estate planning documents like wills, trusts, and powers of attorney. This overview walks through the benefits and limitations of an ILIT, common drafting considerations, and how it interacts with other planning tools such as revocable living trusts and pour-over wills. The goal is to provide clear, practical guidance so you can evaluate whether an ILIT aligns with your objectives for asset protection, privacy, and orderly distribution to your chosen beneficiaries.
An ILIT is designed to remove life insurance proceeds from a taxable estate, provide liquidity to pay estate costs, and ensure distributions are managed according to your preferences. By placing a life insurance policy into an ILIT, proceeds generally avoid inclusion in your estate for tax purposes, which can preserve more wealth for heirs. In addition, an ILIT can protect proceeds from creditor claims, structure distributions over time to beneficiaries, and designate trustees to manage funds responsibly. Properly drafted and administered, an ILIT offers a stable method to transfer funds while maintaining control over timing and use.
The Law Offices of Robert P. Bergman serves clients across California with a focus on practical estate planning solutions tailored to individual family and financial circumstances. Our approach emphasizes clear communication, thorough document drafting, and coordinated planning across trusts, wills, powers of attorney, and healthcare directives. We work closely with clients to design ILITs that align with broader estate plans, taking into account tax considerations, funding strategies, and beneficiary needs. Our priority is to provide reliable guidance that helps clients feel confident their legacy planning decisions are well organized and legally sound.
An Irrevocable Life Insurance Trust is a trust entity that owns and is beneficiary of a life insurance policy on the grantor’s life. Once established and funded, the trust owns the policy and the grantor generally cannot change the ownership or beneficiary designations. This structure can keep insurance proceeds out of the grantor’s gross estate for estate tax purposes, provided the transfer rules are observed and the policy is owned by the ILIT for the required period. The trustee receives death benefits and distributes them according to the trust’s terms, which can include lump sum payments, staggered distributions, or ongoing support for beneficiaries.
Creating an ILIT involves drafting trust documents, naming a trustee, transferring ownership of an existing policy or arranging for a new policy to be issued to the trust, and maintaining proper documentation and annual gifting mechanisms if needed to pay policy premiums. Funding the ILIT may require gift tax annual exclusion planning or use of other gifting strategies to provide the trust with premium funds. Additionally, the selections made in trust provisions—such as distribution timing, successor trustee authority, and beneficiary classes—affect how the proceeds will be used and protected after the grantor’s death.
An ILIT is a legal arrangement in which a grantor transfers ownership of a life insurance policy to a trust that cannot be revoked or altered by the grantor after execution. The primary purpose is to ensure that the insurance proceeds are not included in the grantor’s taxable estate and are controlled by the trustee for the benefit of named beneficiaries. This control allows for tailored distribution methods, creditor protection in certain circumstances, and use of proceeds to cover estate settlement costs without increasing estate tax liability. The ILIT structure must be implemented carefully to meet technical requirements under federal and state law.
The core components of an ILIT include the trust document, trustee appointment, beneficiary designations, policy ownership transfer, and ongoing administration including premium funding. Drafting clear trust language governs how proceeds may be used, who serves as trustee, successor trustee provisions, and distribution timing. After the trust is created, ownership of an existing policy is transferred to the trust or a new policy is issued in the trust’s name. Funding arrangements often rely on historical gifting strategies to allow the trustee to pay premiums. Proper recordkeeping and regular reviews ensure the trust operates as intended and remains aligned with the overall estate plan.
Understanding common terms related to ILITs helps demystify the process and empowers you to have productive conversations during planning. Below are definitions and explanations of terms you are likely to encounter when considering or establishing an ILIT. These entries describe the roles, legal concepts, and administration practices that shape how an ILIT functions within a broader estate plan. Clear comprehension of these items supports better decision making when selecting trustees, funding methods, and coordinating the ILIT with other estate planning documents.
The grantor is the person who creates and funds the trust by transferring ownership of a life insurance policy into the ILIT. The grantor selects the trustee, sets the terms for distributions, and names beneficiaries. After transferring the policy, the grantor generally gives up direct control over the policy and the trust assets. This relinquishment of control helps ensure the proceeds are treated as trust property rather than part of the grantor’s taxable estate. The grantor’s intent and timing of transfers are important factors that influence how tax rules will apply.
The trustee is the individual or entity appointed to manage the ILIT, hold title to the life insurance policy, collect proceeds at the policy’s payout, and distribute funds per the trust’s instructions. A trustee has fiduciary duties to act in the beneficiaries’ best interests, maintain accurate records, and administer the trust in accordance with its terms and applicable law. Trustee responsibilities include accepting policy ownership, managing premium funding arrangements, communicating with beneficiaries, and carrying out distribution provisions. Choosing an appropriate trustee involves balancing administrative ability, trustworthiness, and availability to serve for the long term.
A beneficiary is a person or entity designated in the ILIT to receive benefits from the trust, including life insurance proceeds and any income generated by those proceeds. Beneficiaries can be individuals, charities, or other trusts, and the trust document specifies when and how they receive funds. Distribution options may include immediate lump sums, staged payments over time, or payments for specified purposes such as education or healthcare. The trustee’s job is to follow the trust’s distribution instructions and manage funds prudently for the beneficiaries’ benefit according to the terms set by the grantor.
A Crummey notice is a written communication given to beneficiaries to advise them of their right to withdraw a gift contributed to the ILIT for a limited period, making the gift eligible for the annual gift tax exclusion. Proper use of Crummey powers can enable premium contributions to avoid gift tax consequences, provided notices are timely and the withdrawal right is real, even if not exercised. Gift tax reporting and annual exclusion limits must be observed, and careful documentation supports the intended tax treatment. Planning with these mechanisms requires attention to timelines and notification procedures to be effective.
When considering an ILIT, it is helpful to compare it against alternatives like keeping the policy in your revocable living trust, naming beneficiaries directly, or using corporate ownership for business-related policies. An ILIT typically offers stronger sheltering of proceeds from estate inclusion than leaving a policy in your individual name, but it requires relinquishing ownership and managing ongoing administrative duties. Other options may offer more flexibility but less protection from estate taxes or creditor claims. Evaluating trade-offs across control, tax outcomes, and administrative complexity helps determine which arrangement best aligns with personal goals and family circumstances.
If your life insurance policy values are modest relative to your overall estate and you do not face significant estate tax exposure, retaining direct ownership or naming beneficiaries outright may provide adequate liquidity without the complexity of an ILIT. Simpler arrangements reduce administrative burdens and allow you to retain more direct control over policy decisions. For those whose principal aim is straightforward beneficiary designation and ease of management, the limited approach can be a practical fit while other components of the estate plan handle asset distribution and incapacity planning.
If you anticipate making frequent changes to the policy, such as modifying coverage amounts, changing beneficiaries often, or accessing cash value during life, holding the policy outside an irrevocable trust provides greater flexibility. An ILIT requires a level of permanence that can restrict later adjustments and access, so individuals who prioritize adaptability may prefer other structures. It is important to weigh the benefits of flexibility against potential tax advantages and protection an ILIT could provide, balancing current preferences with long-term planning objectives.
For individuals with large estates or complex asset mixes, an ILIT can provide meaningful estate tax planning benefits while ensuring liquidity to pay estate settlement costs, taxes, and administration obligations. Comprehensive planning coordinates the ILIT with other trusts, retirement accounts, and business interests to maximize overall effectiveness. This integrated approach helps preserve more assets for heirs, reduce friction during settlement, and ensure that life insurance proceeds are available for their intended uses without increasing the taxable estate.
An ILIT lets you set conditions on distributions, protect proceeds from creditors or poor financial decisions by beneficiaries, and provide ongoing support for minors, dependents with special needs, or family members who require structured financial oversight. A comprehensive plan addresses trustee selection, distribution schedules, and safeguards for unforeseen circumstances. These measures help ensure funds are used as intended and that beneficiaries receive support over time rather than in a potentially damaging lump sum, aligning the distribution plan with long-term family and financial objectives.
A thorough ILIT strategy provides coordinated tax planning, creditor protection to the extent permitted by law, and clear mechanisms for distributing life insurance proceeds according to detailed instructions. By integrating the ILIT into an overall estate plan, you preserve flexibility in other areas while maintaining targeted protections for insurance proceeds. Comprehensive planning also anticipates administration needs such as premium funding, Crummey notice procedures, and trustee powers to manage funds effectively. This reduces the risk of unintended tax consequences or administrative pitfalls after the grantor’s passing.
Another important advantage of a comprehensive approach is the ability to address family dynamics and succession planning proactively. Trust provisions can be tailored to provide age-based distributions, education funding, or protections for family members with special needs, ensuring resources are allocated thoughtfully. A coordinated document suite including wills, revocable trusts, and health care directives helps streamline estate settlement and clarifies intentions, which can reduce disputes and facilitate a smoother transition for beneficiaries at a difficult time.
When structured correctly, an ILIT reduces the potential inclusion of life insurance proceeds in the grantor’s gross estate, which may lower estate tax exposure and preserve more wealth for heirs. By isolating proceeds from estate calculations, an ILIT can provide liquidity for estate settlement without forcing the sale of assets. This benefit complements other tax planning measures and supports a cohesive strategy to transfer assets with minimal erosion from taxes and settlement costs, while still honoring the grantor’s distribution preferences.
An ILIT allows the grantor to set terms that control timing and conditions of distributions, which can protect beneficiaries from immediate exposure to large sums and provide for staged or purpose-limited support. This structured approach helps preserve assets for longer-term family needs and reduces the risk of funds being misused or lost to creditors. Trustees can be directed to make distributions for defined purposes such as education, health care, or support, ensuring proceeds align with the grantor’s intent and provide durable financial protection for beneficiaries over time.
Begin ILIT planning by reviewing your overall estate plan, including wills, revocable trusts, powers of attorney, and beneficiary designations. Coordinating these documents prevents conflicting instructions and ensures the ILIT functions as intended. Confirm that your trustee selection, funding strategy for premiums, and distribution provisions align with your goals for tax treatment, liquidity, and beneficiary support. Early coordination reduces the risk of costly corrections later and helps ensure the ILIT is integrated into a comprehensive plan that addresses both lifetime and post-death needs.
Choose a trustee who is willing and able to manage insurance ownership, premium receipts, recordkeeping, and distribution obligations. The trustee should have the temperament to administer trust distributions in line with your wishes and the practical ability to handle paperwork, tax filings, and communications with beneficiaries. While a family member may serve as trustee in some cases, many people consider a professional or institutional trustee for continuity, neutrality, and to ensure consistent administration over time.
An ILIT is often considered by individuals who wish to reduce estate tax exposure, provide dedicated liquidity for estate settlement, or impose control over how life insurance proceeds are distributed to beneficiaries. It can be particularly useful when the estate includes illiquid assets such as real estate or business interests, where proceeds from the ILIT can prevent forced sales to cover taxes or debts. The ILIT also supports planning for minor beneficiaries, those who need ongoing support, or situations where creditor protection of proceeds is a priority.
Other common reasons to use an ILIT include coordinating life insurance with retirement planning, addressing blended family concerns, and protecting legacy intentions from changes in personal circumstance. The structure helps separate insurance proceeds from the grantor’s estate and enables tailored instructions for use of funds. Considering an ILIT involves evaluating these benefits against the loss of direct control over the policy and the requirement to adhere to funding and administration protocols that maintain the intended tax and legal outcomes.
Common circumstances that prompt consideration of an ILIT include having a sizable life insurance policy that might otherwise be included in the estate, needing liquidity to pay estate taxes or administration costs, protecting proceeds for vulnerable beneficiaries, or coordinating insurance with business succession plans. An ILIT can be an effective tool for people with complex asset portfolios, blended families who desire controlled distributions, or those seeking to create a legacy for charitable giving while preserving estate value for heirs.
When life insurance proceeds are significant relative to estate size, an ILIT helps keep those proceeds out of the taxable estate and ensures they are deployed according to the grantor’s intentions. By transferring policy ownership to the trust and following proper funding procedures, the proceeds can be managed to provide liquidity for taxes and administration without increasing estate value. This approach can preserve asset value for beneficiaries and ease the financial burdens that may arise during estate settlement.
If beneficiaries include minors, individuals with special needs, or those who may not be prepared to manage a large sum, an ILIT enables the grantor to create distribution schedules and purpose-limited payments. The trustee can oversee funds to support education, health care, and ongoing living expenses according to the trust’s terms. Such structured distributions help protect funds from mismanagement and provide a stable source of support for beneficiaries over time, aligning financial resources with their needs.
For residents of La Mirada and surrounding communities in Los Angeles County, local legal guidance can help you navigate California-specific considerations for ILITs, including state tax rules, trust administration requirements, and coordination with other estate planning documents. The Law Offices of Robert P. Bergman provide consultations to assess whether an ILIT suits your circumstances and work to implement a plan that aligns with your goals. We focus on clear communication and practical steps to create trust documents, effect transfers, and set up ongoing administration to support your plan.
The firm takes a client-focused approach to estate planning that emphasizes thorough documentation, thoughtful trustee selection, and careful coordination with insurance providers and financial advisors. We aim to provide you with a clear roadmap for establishing and funding an ILIT that fits your family and financial situation. Our process is designed to explain the implications of each decision and to prepare the documentation necessary to implement your objectives effectively and efficiently.
When creating an ILIT we pay close attention to details such as the timing of transfers, gift tax considerations, Crummey notice procedures, and coordination with existing estate planning instruments. This attention helps avoid common pitfalls that can undermine the intended treatment of life insurance proceeds. We also support clients in selecting trustees and establishing practical administrative practices to maintain compliance and preserve the benefits of the ILIT over time.
Our goal is to make the ILIT process understandable and manageable, providing clear steps for document execution, policy transfer, and premium funding. We work to anticipate issues that might arise during administration and prepare the trust documentation to handle changes in family circumstances or financial conditions. This forward-looking planning helps ensure that the ILIT functions as part of a durable estate plan that serves your legacy goals and supports your beneficiaries.
Our ILIT process begins with an initial consultation to review your assets, beneficiary goals, and any existing estate planning documents. From there we draft trust documents, coordinate the transfer or issuance of the insurance policy to the ILIT, and outline funding methods for premiums. We also prepare any necessary notices and provide guidance on recordkeeping and tax reporting. Throughout the process, we keep clients informed and provide practical recommendations to ensure the trust is implemented correctly and functions as intended.
Step one focuses on identifying goals, reviewing existing plans, and preparing trust documents tailored to your wishes. This includes naming trustees and beneficiaries, drafting distribution clauses, and addressing potential contingencies. We ensure the trust language is clear about the trustee’s powers, distribution rules, and procedures for funding premiums. Careful drafting at this stage lays the foundation for a durable ILIT that can be administered smoothly and that aligns with your overall estate plan.
We review your will, revocable trust, beneficiary designations, powers of attorney, and healthcare directives to coordinate the ILIT with your complete plan. Consistency across documents avoids conflicts and unexpected outcomes. Our review identifies whether beneficiary updates, pour-over wills, or additional trust provisions are necessary to ensure the ILIT complements existing arrangements and accomplishes your objectives for asset transfer, tax planning, and beneficiary support.
Drafting the ILIT involves specifying trustee powers, distribution mechanisms, funding strategies, and procedures for handling insurance policies. We prepare a clear funding plan that addresses premium payments, Crummey notices if used, and documentation to preserve desired tax treatment. This step ensures that the trust is ready to accept ownership of a policy and that administrative responsibilities are defined to support long-term compliance and effectiveness.
In the second phase we handle the transfer of existing insurance policies into the trust or assist in issuing new policies in the ILIT’s name. We coordinate with insurers and financial institutions to ensure ownership records are updated and beneficiary designations reflect the trust. Additionally, we implement the funding strategy so premiums are provided to the trustee in a manner consistent with gift tax rules and the trust’s requirements. Proper execution at this stage is essential to achieve the projected estate and tax outcomes.
We communicate with insurance carriers to ensure the policy transfer is executed correctly, including changes in ownership and beneficiary designations. Collaboration with financial advisors helps align premium funding and integrate the ILIT with retirement planning and asset allocation. Thorough coordination prevents administrative errors and ensures the trust owns the policy as intended, which supports the desired estate planning treatment and reduces the risk of unintended tax inclusion or other complications.
We set up funding protocols such as annual gift contributions, trust bank accounts to receive gifts, and written procedures for issuing Crummey notices where applicable. Clear documentation of contributions, notices, and trustee actions supports proper tax reporting and maintains the integrity of the ILIT’s structure. This organized approach helps streamline administration and provides a defensible record should questions arise during estate settlement or tax review.
After the ILIT is established and funded, ongoing administration is necessary to maintain records, issue notices, pay premiums if required, and carry out distributions in accordance with the trust terms. Periodic reviews ensure the ILIT remains aligned with changes in law, family circumstances, or financial conditions. We provide guidance on administration best practices and support trustees in meeting reporting obligations, communicating with beneficiaries, and making informed decisions about trust assets over time.
We advise trustees on their duties, help maintain organized records of premium payments and notices, and prepare documentation needed for tax reporting and fiduciary accounting. Proper recordkeeping is essential to demonstrate that the ILIT is funded and administered in the way intended, which helps preserve its tax and legal benefits. Trustees receive practical guidance to fulfill their responsibilities responsibly and in compliance with the trust’s terms and applicable law.
Life changes and legal updates may affect the optimal operation of an ILIT, so periodic reviews keep the plan current. We recommend regular check-ins to reassess beneficiary needs, confirm premium funding strategies remain appropriate, and update related estate planning documents as necessary. These reviews help ensure the ILIT continues to serve the grantor’s intent and adapts to evolving circumstances without undermining its intended benefits.
An Irrevocable Life Insurance Trust is a trust that owns a life insurance policy and names beneficiaries to receive proceeds through the trust. Unlike owning a policy personally, where proceeds pass directly to named beneficiaries and may be included in the owner’s estate, an ILIT holds the policy outside the grantor’s taxable estate when properly executed and funded. The trust structure enables the trustee to receive the death benefit and distribute it according to the trust terms rather than through probate, which can provide greater control over timing and use of funds. The distinction rests on ownership and control. When the trust owns the policy, the policy proceeds are generally treated as trust assets and not part of the grantor’s estate, subject to applicable ownership transfer timing rules. This arrangement can offer tax planning advantages and structured distributions. However, it requires giving up direct control over the policy and adhering to administrative and funding requirements to preserve the intended tax and legal results.
Funding an ILIT often involves annual gifts from the grantor to the trust that the trustee uses to pay policy premiums. To enable those gifts to qualify for the annual gift tax exclusion, the trust may include a temporary withdrawal right for beneficiaries, known as a Crummey right, and the trustee issues notices informing beneficiaries of their withdrawal window. When notices are timely and the withdrawal right is real, the gifts can be treated as present interest gifts eligible for the exclusion, making ongoing premium funding more administratively feasible. Execution requires consistent documentation and adherence to procedures. The trustee must maintain records of gifts, notices, and whether withdrawal rights were exercised. Even when beneficiaries do not exercise the right, proper notice and opportunity are necessary. Sound documentation helps support the tax treatment of contributions and protects the intended structure of the ILIT from technical challenges during estate administration or tax review.
Transferring an existing policy into an ILIT is possible but must be done with attention to timing and tax rules. If the transfer occurs within three years of the grantor’s death, federal tax rules may still include the proceeds in the grantor’s estate. This potential three-year look-back makes early planning important for those seeking full estate tax benefits. Additionally, transferring ownership may trigger insurer requirements such as consent forms or medical underwriting in some cases, depending on the policy type and insurer rules. There can also be gift tax considerations when transferring a policy to the trust, particularly if the policy has cash surrender value. Proper planning addresses whether the transfer is structured as a gift and whether gifting strategies such as leveraging annual exclusions are used. Coordinating with insurance providers and maintaining accurate records ensures the transfer is effected smoothly and preserves the intended estate and tax treatment where possible.
A trustee for an ILIT should be someone or an entity capable of managing fiduciary duties, recordkeeping, communications with beneficiaries, and making decisions about premium payments and distributions. Family members sometimes serve as trustees, but some grantors select a neutral third party or a corporate trustee for continuity and impartial administration. The trustee’s responsibilities include accepting policy ownership, collecting contributions, issuing notices if Crummey powers are used, paying premiums, and executing distributions according to the trust document. The right trustee balances trustworthiness with administrative capacity and availability to serve long term. Trustees must maintain accurate records and act in the beneficiaries’ best interests, following the trust’s terms and applicable governing law. When selecting a trustee, consider whether the person or institution is comfortable handling fiscal and administrative tasks and whether they will honor the grantor’s distribution intentions reliably over time.
Life insurance proceeds payable to an ILIT are generally not subject to federal estate tax if ownership and transfer rules are appropriately observed, but state-level rules and interactions with other assets should be evaluated in the context of California law. California does not impose a separate state estate tax currently, but coordination with federal transfer tax rules and income tax matters for beneficiaries can affect overall planning. Careful drafting and administration help achieve the intended separation of proceeds from the grantor’s taxable estate. Although proceeds are typically excluded from the grantor’s gross estate when the trust owns the policy, distributions to beneficiaries after death can have income tax implications depending on how proceeds are paid and invested. Trustees should consider tax reporting obligations and consult with tax advisors as needed to manage income tax consequences associated with trust-held assets and any investment income generated by the proceeds after receipt.
Once an ILIT is established and funded, the trust is irrevocable which means the grantor cannot unilaterally change its terms. If circumstances change significantly after the trust is created, options may include negotiating with beneficiaries and trustees to effect certain changes, pursuing trust decanting under applicable law, or employing judicial modification when permitted. These alternatives depend on the trust language, state law, and the willingness of relevant parties to agree to changes, so early consideration of future flexibility in trust drafting can be helpful. Because unwinding or altering an ILIT can be complicated, careful initial planning is advisable to anticipate possible changes in family structure, finances, or objectives. Incorporating practical provisions such as successor trustee designations, broad trustee powers for administration, and clear distribution criteria can afford some adaptability without altering the irrevocable core. Regular reviews of the trust in light of life events and legal changes help identify whether any formal modification steps may be appropriate down the road.
Distributions from an ILIT are governed by the trust terms and can be structured in many ways, such as lump-sum payments, staggered distributions at set ages, distributions for specific purposes like education or healthcare, or ongoing support payments administered by the trustee. The choice of distribution approach depends on the grantor’s objectives for beneficiary support and protection. The trust language should be specific enough to guide the trustee while allowing sufficient discretion to address changing circumstances for beneficiaries. Trust provisions can balance protection and flexibility by combining fixed events and discretionary powers, enabling trustees to respond to beneficiaries’ needs while following the grantor’s intent. Clear distribution standards reduce ambiguity and potential disputes, and including criteria for trustee decision-making helps ensure consistent administration. Thoughtful drafting supports both fair treatment of beneficiaries and long-term stewardship of trust assets.
An ILIT may provide a level of protection from creditors for life insurance proceeds distributed through the trust, depending on the trust terms and applicable law. Because proceeds are held and controlled by the trustee, they are not owned directly by beneficiaries until distributed, which can reduce exposure to immediate creditor claims. However, protection is not absolute and varies with legal factors, the type of creditor, and whether distributions have been made. Properly worded trust provisions can enhance protective effects but should be considered alongside state laws governing creditor claims against trusts and beneficiaries. For beneficiaries with known creditor risks, the grantor may draft provisions that limit direct distributions or direct the trustee to use funds for specific needs rather than distributing cash outright. Trustees must also consider legal requirements in responding to creditor claims and may need to seek legal advice regarding distribution decisions when creditor issues arise. Strong planning anticipates these concerns and incorporates mechanisms to mitigate risk where appropriate.
Yes, ILITs require ongoing maintenance and careful documentation to preserve the intended tax and legal benefits. Regular tasks include maintaining records of gifts and premium payments, issuing notices when Crummey powers are used, tracking trustee actions and beneficiary communications, and ensuring timely premium payments to avoid policy lapses. Trustees should also keep records that demonstrate compliance with funding procedures and trust terms so that the structure remains defensible during estate settlement or in the event of tax review. Periodic reviews are also important to confirm that the trust continues to align with family circumstances, insurer requirements, and legal developments. Updating related estate planning documents, confirming trustee availability, and reassessing funding strategies help ensure the ILIT remains effective. Proactive maintenance minimizes the risk of administrative oversights that could undermine the trust’s intended benefits and provides clarity for beneficiaries when the trust becomes operative.
An ILIT and a pour-over will often operate together within a broader estate plan, with the pour-over will serving to transfer assets to a primary revocable trust at death while the ILIT specifically owns and handles life insurance policies. The pour-over will ensures that assets not already titled in trust pass into the revocable trust, whereas the ILIT separately governs insurance proceeds held in trust. Coordination between the ILIT and pour-over will clarifies how different assets will be administered and prevents conflicting beneficiary directions between documents. When both instruments are used, careful attention to beneficiary designations and owner records is essential to avoid unintended results. Estate planning that includes an ILIT and a pour-over will should be drafted and reviewed together so that each document complements the other and collectively advances the grantor’s objectives for asset distribution, tax planning, and successor administration.
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