An Irrevocable Life Insurance Trust (ILIT) can be a powerful tool for managing life insurance proceeds, minimizing estate taxes, and protecting assets for intended beneficiaries. Residents of Venice and the surrounding Los Angeles areas often choose an ILIT as part of a thoughtful estate plan that addresses family needs, liquidity at death, and the orderly transfer of wealth. This page explains how an ILIT works, what it can accomplish, and how the Law Offices of Robert P. Bergman can assist in creating a trust tailored to your circumstances and goals while complying with California law and local considerations.
Deciding whether an ILIT is right for you involves careful consideration of your life insurance holdings, estate size, and family dynamics. An ILIT removes the death benefit from your taxable estate when properly structured, provides clear instructions for the distribution of proceeds, and can protect benefits from creditors or unintended claims. We discuss practical steps, common scenarios that prompt an ILIT, and how a trusted Venice-based attorney can draft trust terms, select a suitable trustee, and coordinate beneficiary designations to ensure the trust functions as intended under California law.
An ILIT matters because it offers distinct estate planning advantages that align with the needs of families and individuals in Venice. The trust can exclude the life insurance proceeds from your probate estate, potentially reducing estate tax exposure and easing the administrative burden on loved ones. It also creates a vehicle for managing distributions, imposing conditions or staggered payouts, and protecting proceeds from certain creditor claims. When combined with other estate planning documents such as a pour-over will, powers of attorney, and health care directives, an ILIT supports a comprehensive approach to preserving wealth and providing financial stability for beneficiaries.
The Law Offices of Robert P. Bergman serve clients throughout California with a focus on practical, client-centered estate planning solutions. Our practice emphasizes clear communication, careful drafting, and a commitment to ensuring that each trust reflects the client’s goals. For Venice and Los Angeles residents, we provide sensitive guidance on life insurance trust design, trustee selection, and coordinated beneficiary designations. We work closely with clients to explain options, anticipate tax and family considerations, and implement documents such as revocable living trusts, wills, powers of attorney, and health care directives to ensure the ILIT integrates smoothly into an overall plan.
An ILIT is a trust that owns a life insurance policy or is the beneficiary of policy proceeds, and the policyholder relinquishes ownership to the trust. This irrevocable arrangement means the insured gives up certain rights, which is intended to keep the death benefit out of the insured’s taxable estate when executed properly. Establishing an ILIT requires careful timing, funding, and coordination with the insurer. The trustee manages premium payments and administers proceeds according to trust terms, providing structured distributions that can meet long-term family or financial objectives while potentially limiting estate tax consequences.
Creating an ILIT involves drafting trust documents, transferring an existing policy to the trust or having the trust apply for a new policy, and establishing mechanisms for funding premium payments. Grantors must understand the gift tax implications of funding the trust and the three-year rule that may affect estate inclusion if the insured retains incidents of ownership. Trustee responsibilities and beneficiary designations must be carefully described to avoid unintended results. Proper coordination with a local attorney and financial advisor helps ensure the trust operates as intended under California state rules and federal tax considerations.
An Irrevocable Life Insurance Trust is a legal entity created to hold life insurance policies separate from the insured’s estate. The grantor of the trust transfers ownership or names the trust as beneficiary so that proceeds are managed and distributed according to the trust terms. Because the trust is irrevocable, the grantor cannot unilaterally change the terms, which supports the goal of keeping benefits outside the taxable estate. Trustees administer funds, pay premiums, and follow instructions regarding timing and conditions for distributions, offering control and certainty for beneficiaries while addressing tax and creditor concerns.
Key elements of an ILIT include the trust document, the trustee and successor trustees, funding mechanics, premium payment arrangements, and beneficiary designations. The process begins with the grantor executing the trust and arranging ownership or beneficiary status for the life insurance policy. Trustees must have clear authority to manage premiums, accept contributions, and distribute proceeds. The trust should address contingencies such as policy lapse, changes in family circumstances, and the duties of successor trustees to ensure continuity. Coordination with the insurer and tax advisers is important to avoid unintended estate inclusion or gift tax consequences.
Understanding common terms helps clients make informed decisions about an ILIT. Key vocabulary includes grantor, trustee, beneficiary, incidents of ownership, gift tax, estate tax, transfer-for-value rules, and the three-year rule. Each term relates to how ownership, control, and transfers affect estate inclusion and tax treatment. Reviewing these terms with an attorney ensures the trust is structured to achieve the client’s goals. Clear definitions also help trustees administer the trust properly and beneficiaries understand their rights and the timing of distributions under California law.
The grantor is the person who creates the trust and transfers assets or ownership rights into it. In the context of an ILIT, the grantor typically transfers ownership of a life insurance policy or funds to enable premium payments. Once the transfer is completed and the trust is irrevocable, the grantor gives up certain ownership rights, which is an important part of keeping the policy proceeds separate from the grantor’s estate for tax purposes. The trust document outlines the grantor’s intent and any specific instructions for the trustee to follow.
The trustee is the individual or entity responsible for managing the trust assets, including paying premiums, maintaining records, and distributing proceeds according to the trust terms. Trustees owe fiduciary duties to the beneficiaries and must act in their best interests while following the trust document and applicable California law. Selecting a trustee who understands financial matters and fiduciary responsibilities is important for reliable administration. Successor trustee provisions should be included to ensure a smooth transition if the initial trustee can no longer serve.
A beneficiary is any person or entity designated to receive trust distributions from the ILIT. Beneficiary designations should be specific and aligned with the overall estate plan. The trust document can set conditions for distributions, such as age thresholds, educational expenses, or staggered payments, to ensure proceeds are used in a way that reflects the grantor’s wishes. Beneficiaries should be informed of their rights and the processes that will govern access to funds after the insured’s death.
Incidents of ownership refer to powers that, if retained by the insured, can cause life insurance proceeds to be included in the insured’s taxable estate. California and federal rules include a three-year lookback that can bring transferred policies back into the estate if the insured dies within three years of transfer while retaining certain ownership rights. Properly structuring the transfer and avoiding retained incidents of ownership are essential to achieve the intended estate tax treatment and prevent unintended inclusion of the policy proceeds in the estate.
When comparing an ILIT to other estate planning tools, consider how life insurance proceeds are treated, who controls distributions, and the desired degree of protection from creditors and taxes. A revocable living trust provides flexibility during life but does not exclude life insurance proceeds from the taxable estate. Direct beneficiary designations are simple but offer less control and protection. An ILIT offers specific benefits for life insurance assets, including removal from the taxable estate and structured distributions, but requires relinquishing ownership and careful management of funding arrangements to avoid tax pitfalls.
A limited approach may be appropriate when life insurance proceeds are modest in relation to overall estate value and when beneficiaries are capable of managing funds responsibly. In such situations, naming beneficiaries directly on the policy or combining it with a straightforward will may meet objectives without creating a formal ILIT. However, even modest estates should consider whether creditor protection or specific distribution controls are needed. Consulting with a Venice attorney helps determine if a simple arrangement suffices or whether the additional protections of an ILIT would better preserve family interests over time.
If the family structure is uncomplicated and beneficiaries are trusted adults, a limited approach can offer clarity and ease of administration. Direct designations and basic estate documents may be adequate to transfer proceeds without probate. This approach reduces paperwork and ongoing administration. That said, even simple families may face future changes in circumstances such as beneficiary financial difficulty, creditor claims, or remarriage. Reviewing planning choices periodically ensures the selected approach continues to align with your goals and adapts to changing needs within Venice, Los Angeles County, and broader California law.
A comprehensive approach, including an ILIT and complementary documents such as revocable trusts, wills, and powers of attorney, is often appropriate for larger estates or families with blended relationships. These strategies offer enhanced control over distribution timing, protection from potential creditor claims, and coordination with beneficiary designations to reflect the grantor’s nuanced wishes. For Venice residents with substantial life insurance holdings or complex financial matters, thorough planning helps address tax exposure, liquidity at death, and the long-term stewardship of assets for multiple generations.
Individuals who prioritize asset protection, precise distribution instructions, and effective tax planning benefit from a comprehensive estate planning strategy that integrates an ILIT. The trust can protect proceeds from certain claims, specify how funds will be used over time, and coordinate with retirement and other investments. Achieving these goals requires careful drafting, attention to tax timing rules, and collaboration among legal and financial advisors. A comprehensive plan anticipates future events and provides mechanisms for successor administration to preserve intended outcomes for beneficiaries.
Incorporating an ILIT into a broader estate plan brings benefits such as potential estate tax mitigation, controlled distribution of life insurance proceeds, and reduced probate involvement for those funds. The trust structure also enables the grantor to set distribution terms for specific purposes, including education, health care, or long-term maintenance. By coordinating trustee responsibilities and beneficiary designations, a comprehensive plan helps ensure that proceeds are used in alignment with the grantor’s wishes while providing continuity of management in the event of incapacity or death.
Another benefit of a comprehensive approach is that it can safeguard proceeds against certain creditor claims and provide continuity through named successor trustees. When the plan includes instruments such as financial powers of attorney, advance health care directives, and pour-over wills, the ILIT functions as part of a cohesive system to manage both immediate and long-term needs. Working with legal counsel to align these components is essential to avoid conflicts, reduce administrative burdens for survivors, and maintain compliance with California and federal rules affecting trusts and estates.
One of the principal benefits of an ILIT within a comprehensive plan is the potential management of estate tax exposure. When a life insurance policy is owned by an irrevocable trust that the insured does not control, the proceeds are generally excluded from the insured’s estate, subject to timing and ownership rules. This separation can preserve more wealth for beneficiaries and provide liquidity to pay estate expenses or taxes without forcing the sale of other assets. Proper planning and documentation are essential to realize these benefits under applicable tax rules.
An ILIT allows grantors to set terms for how and when beneficiaries receive proceeds, offering protection from imprudent spending and providing support for long-term needs. The trust can specify distributions for health, education, maintenance, or other purposes, and can stagger payments to protect younger beneficiaries. Because the trustee manages funds, distributions can be made with professional oversight, reducing the burden on family members and ensuring that benefits serve the grantor’s intentions. Including clear instructions in the trust document minimizes ambiguity for trustees and beneficiaries alike.
When establishing an ILIT, coordinate ownership changes and beneficiary designations carefully to avoid unintended tax consequences. If transferring an existing policy, ensure the insurer recognizes the trust as owner or beneficiary and document the transfer properly. Be mindful of the three-year rule and avoid retaining incidents of ownership that could cause estate inclusion. Communicating with financial institutions and updating records reduces administrative delays and ensures that the trust functions as intended when benefit payments become payable.
Life events, tax law changes, and evolving family circumstances can affect whether an ILIT continues to meet your objectives. Periodic reviews allow adjustments to trustee designations, funding arrangements, and complementary estate planning documents such as wills and powers of attorney. Regularly verifying beneficiary designations on other accounts and coordinating them with the trust reduces the risk of conflicting instructions. A scheduled review helps keep your plan aligned with your goals and responsive to changes in personal or financial situations.
Consider an ILIT if you want life insurance proceeds managed outside your taxable estate, need structured distributions for beneficiaries, or want to reduce the burden on loved ones at the time of death. An ILIT is often appropriate when estate liquidity is a concern, when beneficiaries require protections from creditors or poor financial decision-making, or when you wish to leave clear instructions governing the use of proceeds. Discussing your objectives with counsel can help determine whether an ILIT, alone or combined with other planning tools, fits your overall estate plan.
Individuals with significant life insurance coverage, blended families, or specific distribution goals may find an ILIT particularly useful. The trust structure supports long-term planning, ensuring proceeds are used for intended purposes such as education, health care, or family maintenance. It also offers an orderly mechanism for trustee-managed distributions. While an ILIT requires relinquishing ownership, the trade-off is enhanced control after death and potential tax benefits. A detailed consultation can help clarify the trade-offs and establish a plan that aligns with California law and personal priorities.
Typical circumstances that prompt consideration of an ILIT include large life insurance holdings that could increase estate tax exposure, blended family considerations where the grantor wants to protect assets for children from a prior relationship, or beneficiaries with special financial needs requiring oversight. Other triggers include the desire to provide liquidity to pay estate obligations, protect proceeds from business creditors, or ensure orderly management for young beneficiaries. Each circumstance requires tailored drafting to reflect intended outcomes and address potential legal and tax issues.
When life insurance proceeds represent a significant portion of the overall estate, an ILIT can help manage possible estate tax consequences and provide liquidity for estate obligations. By transferring ownership or naming the ILIT as beneficiary in the proper manner, the death benefit may be excluded from the taxable estate. Careful consideration of transfer timing and the avoidance of retained ownership rights is necessary to maintain the intended tax treatment. Coordination with financial advisors and legal counsel ensures the trust aligns with the broader estate plan and tax strategy.
Grantors who wish to protect proceeds for children, grandchildren, or beneficiaries with special needs often use an ILIT to set conditions for distributions and to provide ongoing financial oversight. The trust can direct funds for specific purposes such as education, health care, or long-term maintenance, reducing the risk of mismanagement. Including detailed trustee powers and distribution standards in the trust document gives confidence that funds will be used as intended and supports intergenerational planning goals for families in Venice and across California.
Business owners may use an ILIT to keep life insurance proceeds separate from the business and personal estate, offering liquidity to support succession plans or pay estate obligations without forcing asset sales. The trust structure can also help protect proceeds from certain creditor claims depending on timing and structure. Proper coordination with business succession planning documents and an understanding of applicable creditor rules help ensure that proceeds are available when needed and distributed according to the owner’s intent.
The Law Offices of Robert P. Bergman provide legal services to individuals and families in Venice, Los Angeles County, and throughout California. We focus on clear communication and practical solutions to help clients design and implement ILITs that reflect their wishes. Our approach emphasizes thorough documentation, coordination with insurers and financial advisors, and attentive administration to minimize stress for families. We are available to meet in person or remotely to discuss your situation, answer questions, and guide you through each step of establishing and funding an ILIT.
Choosing the right firm matters because careful drafting and coordination significantly affect whether an ILIT accomplishes its intended goals. Our office focuses on practical planning that aligns with clients’ objectives and complies with California law. We take time to explain options, outline potential tax and timing considerations, and propose solutions that suit family dynamics and financial circumstances. Our team works to ensure documentation is clear and reliable so trustees and beneficiaries face fewer disputes and administrative burdens when the trust becomes active.
We emphasize collaborative planning, working with financial advisors, insurance agents, and family members to implement an ILIT smoothly. This collaboration helps ensure premium payment strategies are realistic and that trustee duties are clearly defined. Our process includes discussing successor trustee options, coordinating beneficiary designations, and preparing complementary documents such as pour-over wills, financial powers of attorney, and advance health care directives to create a comprehensive estate plan that supports your long-term goals.
Responsive client service and attention to detail are central to our approach. We provide clear timelines for document execution, help with funding steps, and deliver practical advice on how to maintain the trust. If circumstances change, we assist with appropriate modifications to related estate planning elements where possible, always keeping your objectives and the applicable legal constraints in mind. Our goal is to provide clients with peace of mind that their life insurance proceeds will be managed and distributed in accordance with their wishes.
Our process begins with an initial consultation to understand your goals, family situation, and the specifics of your life insurance holdings. We review existing policies, beneficiary designations, and any relevant estate planning documents. After recommending a plan, we draft the trust, coordinate funding steps, and advise on trustee selection and premium funding mechanisms. We also assist with interactions with insurers to change ownership or beneficiary designations. Post-creation, we provide guidance on maintenance and periodic reviews to ensure the ILIT remains aligned with your objectives under California law.
The first step is a comprehensive review of your current estate plan and life insurance policies, including policy ownership, beneficiaries, and any existing trust documents. We evaluate how an ILIT would interact with your broader plan and identify potential tax or administrative issues. This step includes discussing funding strategies for premiums, determining trustee responsibilities, and assessing timing considerations such as the three-year rule. Our objective is to develop a clear plan that balances the benefits of an ILIT with practical considerations for your family and financial situation.
During document review, we examine policies, beneficiary designations, and related estate planning instruments to ensure consistency and identify any conflicts. Coordination with financial advisors and insurance agents is arranged when necessary to confirm policy transfer options and premium payment logistics. We also discuss alternative planning tools and the potential impact on estate liquidity. Clear identification of objectives and constraints at this stage helps prevent later complications and ensures the trust is structured to meet your long-term goals while complying with applicable rules.
Selecting an appropriate trustee and drafting precise trust terms are key to successful ILIT implementation. We discuss trustee qualities, powers, and successor arrangements with you, and draft provisions that set distribution standards and administrative protocols. The trust should anticipate contingencies, define trustee authority over premium payments and investments, and address successor trustee authority. Clear trust language reduces ambiguity for trustees and beneficiaries and provides a roadmap for administration that aligns with your estate planning objectives.
Once the plan is finalized, we prepare the trust documents and handle the necessary paperwork to transfer ownership or designate the trust as beneficiary of a life insurance policy. This step requires careful documentation to ensure the transfer is effective and to document the grantor’s intent. If a new policy is being issued to the trust, we coordinate the application process and funding. Our team ensures that insurer requirements are met and that proper records are kept to support the trust’s intended tax and administrative treatment.
Execution of trust documents is completed according to legal formalities, and we provide clear funding instructions for premium payments. If the trust will receive gifts to cover premiums, we explain gift tax considerations and help structure contributions. Documentation that identifies trustee authority to accept contributions and pay premiums is important for good administration. We also prepare any ancillary instruments needed to integrate the ILIT with the rest of your estate plan.
Effective coordination with the life insurance company is necessary to update ownership and beneficiary records and to confirm the insurer’s requirements for transfers to a trust. We assist in communicating with the insurer, obtaining confirmation of changes, and maintaining copies of communications and endorsements. Keeping meticulous records helps support the intended treatment of the policy and provides documentation for trustees when premium payments and claims arise.
After the ILIT is established and the policy is properly transferred, ongoing administration includes making or coordinating premium payments, maintaining records, and reviewing the trust periodically. Trustee duties may involve filing necessary tax forms, managing trust investments, and implementing distributions when the insured dies. We provide guidance to trustees and grantors on maintaining the trust, updating supporting estate documents, and periodically reviewing the plan to adapt to changed circumstances, tax law updates, or family needs.
Trustees need support to comply with reporting and recordkeeping obligations, and we can assist by providing templates and guidance on documentation. This includes keeping premium payment records, beneficiary communications, and any tax filings related to the trust. Clear reporting helps maintain transparency with beneficiaries and reduces the potential for disputes. Periodic counsel ensures the trustee remains informed about legal duties and practical steps needed to administer the trust responsibly and in accordance with the trust terms.
Regular reviews of the ILIT and related estate planning documents help ensure that the plan remains aligned with your goals and current law. Reviews can identify necessary updates to trustee designations, funding mechanisms, or complementary documents. Life changes such as marriage, divorce, births, or changes in financial circumstances may prompt adjustments. We provide periodic checkups and recommendations for modifications to keep the ILIT effective and integrated with your overall estate strategy.
An Irrevocable Life Insurance Trust is a trust that owns a life insurance policy or is the beneficiary of policy proceeds, and it is designed to keep those proceeds separate from the grantor’s taxable estate when correctly implemented. The grantor transfers ownership or designates the trust as beneficiary, giving the trustee authority to manage the policy and distribute proceeds according to the trust terms. The arrangement is irrevocable, meaning the trust terms cannot be changed unilaterally by the grantor, which supports the goal of excluding the proceeds from estate inclusion under current rules. The trustee has responsibility for administration, including payment of premiums if the trust holds funds to do so, filing necessary records, and distributing proceeds after the insured’s death. Setting up an ILIT requires coordination with the insurance company, careful attention to gift tax and ownership rules, and clear drafting to define trustee powers. Consulting with counsel is recommended to ensure the transfer and trust terms achieve the intended tax and practical outcomes under California law.
Once a life insurance policy is transferred to an ILIT, the grantor no longer owns the policy and therefore generally loses direct access to policy loans, cash value withdrawals, or other owner privileges. This relinquishment of ownership is part of how an ILIT can exclude the death benefit from the grantor’s taxable estate. If maintaining access to policy benefits during life is a priority, alternative planning may be considered, but those alternatives may not provide the same estate tax or creditor protection benefits. If a grantor wishes to retain certain lifetime benefits, it is essential to weigh those personal needs against the potential estate planning advantages of an ILIT. We discuss these trade-offs during the planning process and help structure a plan that balances access during life with the grantor’s objectives for post-death distributions. Proper documentation and coordination with the insurer ensure the transfer accomplishes the desired results while avoiding unintended retained ownership.
The three-year rule is a tax provision that may bring life insurance proceeds back into the insured’s estate if the insured dies within three years of transferring a policy while retaining incidents of ownership. This rule aims to prevent last-minute transfers designed solely to avoid estate inclusion. To avoid triggering estate inclusion, transfers should be complete and the insured should not retain ownership-like powers, such as the ability to change beneficiaries or borrow against the policy. Planning around the three-year rule requires attention to timing and the scope of rights retained by the grantor. If you are considering transferring a policy, we evaluate timing, document transfers carefully, and advise on steps to reduce the likelihood that proceeds will be included in your estate. In some situations, obtaining a new policy owned directly by the trust can avoid the three-year lookback complication.
Choosing a trustee for an ILIT involves selecting someone who can administer the trust responsibly and follow the trust’s instructions under applicable law. Trustees manage premium payments, keep records, coordinate with insurers, and distribute proceeds according to the trust terms. The ideal trustee understands fiduciary obligations, communicates with beneficiaries, and can coordinate with legal and financial advisors. Individuals often name a trusted family member as trustee, or select a professional trustee or co-trustee arrangement to provide administrative continuity and support. Naming successor trustees and outlining clear trustee powers in the trust document helps avoid administration gaps if a trustee becomes unavailable. We help clients draft provisions for trustee succession, decision-making authority, and compensation where appropriate. Providing detailed guidance reduces potential disputes and facilitates efficient administration when duties fall to the trustee after the insured’s death.
An ILIT can offer protection from certain creditor claims depending on timing, trust terms, and applicable law, because the proceeds are owned and controlled by the trust rather than the insured’s personal estate. When structured properly, the trust prevents direct ownership by beneficiaries until distribution, which can shield funds from some creditors. However, protections are not absolute and may vary based on the nature of potential claims and whether transfers were made to hinder creditors. It is important to plan with an understanding of creditor rules and timing considerations. Regarding divorce, an ILIT can limit a spouse’s direct access to proceeds if the trust clearly defines beneficiaries and distribution standards. Yet domestic relations rules and community property considerations under California law may affect how resources are treated in divorce proceedings. Coordinating ILIT planning with family law advice can clarify how proceeds might be treated in specific circumstances and help structure the trust to achieve intended protections where possible.
Premiums for a policy owned by an ILIT can be funded in different ways, commonly through gifts to the trust from the grantor or through regular contributions designated for premium payments. The trust must have clear instructions regarding how premiums will be paid and who will provide funds. Gift tax considerations and annual exclusion rules apply when funding the trust, so it’s important to document gifts correctly and consider using Crummey withdrawal powers if appropriate to qualify transfers for the annual gift tax exclusion. If funds are not available in the trust to pay premiums, the policy could lapse, undermining the trust’s benefits. Planning should include realistic funding mechanisms and communication with beneficiaries about their potential role and responsibilities. We help clients design funding strategies that balance tax considerations with practical administration to maintain the policy and preserve the intended value for beneficiaries.
A well-drafted ILIT includes provisions for successor trustees to step in if the initial trustee is unable or unwilling to serve. The trust document should name alternate trustees and outline the process for appointment to ensure continuity. When a trustee resigns, the successor follows the trust’s instructions for administration and distribution. Clear guidelines reduce disputes and ensure that trust administration continues without unnecessary delay or interruption, protecting beneficiaries’ interests when duties transfer to a new trustee. If there is uncertainty or a vacancy in the trustee role, courts can appoint a trustee upon petition, though this may involve additional time and expense. To avoid court involvement, we recommend naming qualified successors in the trust and providing flexibility to appoint corporate or governmental trustees if desired. Including practical instructions for successor appointment helps preserve the trust’s function and intended outcomes.
Creating an ILIT typically requires updating your broader estate plan to ensure consistency across documents such as wills, revocable trusts, and beneficiary designations. A pour-over will can direct residual assets into your revocable trust, and powers of attorney and advance health care directives should reflect your overall plan for incapacity and decision-making. Coordinating these documents ensures that assets outside the ILIT are handled in a manner consistent with your objectives and reduces the chance of conflicting instructions for heirs and fiduciaries. After establishing an ILIT, reviewing beneficiary designations on retirement accounts, bank accounts, and other policies is important to avoid unintended outcomes. We assist clients in aligning all parts of their estate plan so that the ILIT functions as intended and other assets pass according to the broader plan. Periodic reviews maintain consistency as laws and life circumstances evolve.
Yes, a grantor can arrange for the ILIT to purchase a new life insurance policy, either by applying for a policy issued directly to the trust or by having the trust named as the owner and beneficiary. When a new policy is issued in the name of the ILIT, the trust becomes the owner from inception, eliminating transfer timing concerns and simplifying estate tax considerations. Funding mechanisms must be in place to pay premiums, and the trust should have clear instructions for maintaining coverage. Purchasing a new policy through the ILIT requires coordination with the insurer and careful underwriting considerations. We guide clients through the application process, structure funding arrangements, and document the trust’s rights to hold the policy. This approach is often effective for those who want to avoid complications of transferring an existing policy and seek a clean ownership structure from the start.
You should review your ILIT and overall estate plan periodically, generally after major life events such as marriage, divorce, births, deaths, changes in health, or significant financial changes. Additionally, reviews are advisable when there are material changes in tax law or insurance markets that could affect the trust’s effectiveness. These reviews help ensure trustee selections remain suitable, funding mechanisms are adequate, and trust terms reflect current family circumstances and objectives. Regular checkups, at least every few years, allow for adjustments where appropriate and help maintain alignment with your goals. We offer periodic reviews to update documents, confirm insurer records, and advise on any necessary steps to keep the trust functioning as intended. Proactive reviews reduce the risk of surprises and ensure beneficiaries receive the intended benefits when the time comes.
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