An Irrevocable Life Insurance Trust (ILIT) is a powerful estate planning vehicle used to manage life insurance proceeds outside of an individual’s taxable estate. Residents of Woodland Hills and nearby communities often choose an ILIT to preserve assets for heirs, reduce potential estate tax exposure, and provide clear instructions for distributing proceeds. The Law Offices of Robert P. Bergman help clients understand how an ILIT fits within a larger estate plan that may also include a revocable living trust, pour-over will, powers of attorney, and healthcare directives. We focus on clear communication, careful drafting, and pragmatic planning tailored to each family’s goals and circumstances.
Setting up an ILIT involves decisions about trustees, beneficiaries, premium funding methods, and coordination with existing retirement accounts or irrevocable arrangements. A properly drafted ILIT can protect life insurance proceeds from probate and help control how money will be used after death, whether for education, support of a surviving spouse, or continued business operations. For Woodland Hills families, careful timing and compliance with federal tax rules are important to achieve the intended outcomes. This guide explains key terms, processes, and benefits so you can make informed choices about including an ILIT in your estate plan.
An ILIT can provide several important benefits to estate owners who want to preserve life insurance proceeds for heirs while managing tax exposure. By placing a policy in an irrevocable trust, proceeds are generally excluded from the insured’s estate, which may reduce federal estate tax exposure for larger estates. An ILIT also allows the grantor to set specific distribution conditions, protect assets from probate delays, and help ensure responsible stewardship for minor or vulnerable beneficiaries. For families in Woodland Hills, an ILIT can be especially useful when used alongside other planning tools such as pourover wills, powers of attorney, and trust certificates to create a comprehensive, durable plan.
The Law Offices of Robert P. Bergman assists California clients with estate planning matters including trusts, wills, powers of attorney, and specialized trust vehicles such as ILITs. Our approach centers on listening to your goals, explaining legal options in accessible language, and drafting documents that reflect family priorities and state law. We serve clients throughout Los Angeles County, including Woodland Hills, and coordinate estate planning components like transfer documents, HIPAA authorizations, guardianship nominations, and trust certifications. Emphasis is placed on practical implementation, ongoing review, and clear guidance to help families preserve assets and provide continuity for beneficiaries.
An ILIT is a trust created to own a life insurance policy on the life of the grantor. Once the policy is transferred into the trust, the grantor typically cannot change the trust’s terms or regain ownership of the policy, which is why timing and drafting matter. The trust is managed by a trustee who follows the grantor’s instructions for premium payments and distributions to beneficiaries. Properly structured, the trust removes the policy proceeds from the grantor’s estate for tax purposes and helps ensure that proceeds are distributed according to the grantor’s wishes rather than passing through probate.
Key practical considerations include selecting an appropriate trustee, determining funding methods for premiums, and understanding the three-year rule that can affect estate inclusion when a policy is transferred shortly before death. The ILIT must also contain clear distribution standards and may include provisions for protecting beneficiaries who are minors or who receive public benefits. Coordination with broader estate documents — such as revocable living trusts, pour-over wills, and financial powers of attorney — helps to align the ILIT with a household’s overall succession and financial plans.
An Irrevocable Life Insurance Trust is a trust designed specifically to own and control a life insurance policy and the proceeds paid upon the insured’s death. Because it is irrevocable, the trust terms cannot be readily altered by the grantor once the transfer is complete, which helps keep the policy proceeds outside the grantor’s taxable estate. The trustee becomes the legal owner of the policy and is responsible for managing premium payments and administering distributions to beneficiaries in accordance with the trust document. The ILIT can be crafted to accomplish tax planning, beneficiary protection, and orderly distribution objectives.
Establishing an ILIT involves several interrelated steps: drafting a trust document with funding and distribution provisions, transferring an existing policy into the trust or having the trust buy a new policy, naming a trustee, and arranging for premium funding from the grantor to the trust. The trust should include provisions for trustee powers, successor trustees, and guidance on how to distribute proceeds. Attention must be paid to gift tax considerations for funding premiums, the three-year inclusion rule if the insured transfers a policy and dies shortly thereafter, and coordination with other estate planning documents to avoid unintended results.
Understanding terminology helps make informed decisions about ILITs and estate planning more broadly. Terms such as grantor, trustee, beneficiary, irrevocable transfer, and gift tax are central to ILIT planning, as are rules governing estate inclusion and premium funding. A working knowledge of these concepts, along with documents like pour-over wills, HIPAA authorizations, and powers of attorney, ensures a coordinated plan. Below are concise definitions of common terms you will encounter while creating or reviewing an ILIT and related estate planning materials.
The grantor is the person who creates the trust and transfers assets into it. In the context of an ILIT, the grantor typically transfers ownership of a life insurance policy or arranges for the trust to purchase a new policy on the grantor’s life. Once the transfer into the trust is completed, the trust’s terms generally cannot be changed by the grantor, which is why careful drafting is important. The grantor often arranges how premiums will be paid and specifies how and when beneficiaries are to receive trust distributions after the grantor’s death.
The trustee is the individual or corporate entity responsible for managing the trust in accordance with the trust document. For an ILIT, the trustee owns the life insurance policy and handles premium payments, recordkeeping, and distributions to beneficiaries. The trustee should be someone trusted by the grantor and capable of making fiduciary decisions; successor trustees can be named to provide continuity. Trustees must follow the terms of the trust and applicable law when making decisions, keeping beneficiaries informed and ensuring the trust’s objectives are met.
An irrevocable transfer is a conveyance of property into a trust that cannot be undone by the grantor once completed. In ILIT planning, transferring a life insurance policy into an irrevocable trust removes the policy from the grantor’s estate, provided certain timing and legal requirements are satisfied. Because the transfer is generally final, the grantor should carefully consider the implications for control, access to cash values, and coordination with existing beneficiary designations. Proper drafting and tax planning are essential to achieve the intended estate and family goals.
The three-year rule refers to the federal tax provision that can include life insurance proceeds in an insured’s estate if the insured transfers ownership of a life insurance policy within three years of death. This rule is important for ILIT planning because it can undermine the tax objectives of transferring a policy to an irrevocable trust if the insured dies shortly after the transfer. Careful timing, alternative funding strategies, and coordination with other planning tools help manage the implications of this rule and protect the trust’s intended benefits for beneficiaries.
When deciding how to handle life insurance as part of an estate plan, homeowners and business owners in Woodland Hills weigh several approaches: keeping a policy in the insured’s name, naming beneficiaries directly, or transferring the policy to an ILIT. Keeping a policy in the insured’s name is simple but can expose proceeds to estate inclusion. Direct beneficiary designations provide ease of transfer but offer limited control over post-death distributions. An ILIT provides greater control and potential tax benefits but requires careful drafting and irrevocable transfer, so evaluating family goals, asset size, and timing helps determine which option aligns best with your plan.
If a person’s estate is relatively small and life insurance proceeds are intended to pass directly to a surviving spouse, child, or other beneficiary without complex distribution conditions, a limited approach may be appropriate. Direct beneficiary designations or keeping policies in the insured’s name can provide quick access to funds and simplicity for families who do not need the protections or tax planning benefits of an ILIT. Families with straightforward needs should still review beneficiary designations and coordinate them with wills and other plans to avoid unintended conflicts or probate complications.
When the primary goal of a life insurance policy is to provide immediate liquidity for funeral costs, short-term bills, or a confirmed mortgage payoff, a simpler arrangement may suffice. Policies owned outright or with beneficiaries named can deliver funds quickly without trustee administration. However, even for immediate liquidity, it is wise to ensure beneficiary designations are current and consistent with other estate documents. A review of existing arrangements can identify minor changes that still meet short-term objectives while keeping future planning options open for more complex needs.
For individuals with larger estates or significant life insurance assets, comprehensive planning that includes an ILIT can be an effective strategy to manage potential estate tax exposure and provide structured distributions. An ILIT can remove policy proceeds from the taxable estate and empower trustees to manage distributions for long-term beneficiary needs, such as education or retirement funding. Working through a coordinated plan that includes trusts, pour-over wills, and powers of attorney helps ensure that asset transfers and beneficiary protections align with the client’s long-term objectives and family circumstances.
When beneficiaries include minors or individuals who may need support for medical or daily living expenses, an ILIT allows the grantor to set conditions for distributions and appoint a trustee to manage funds responsibly. This approach can protect assets from mismanagement and help maintain eligibility for public benefits where appropriate. A comprehensive plan integrates guardianship nominations, special needs trusts if necessary, and clear instructions for trustees, resulting in a tailored strategy that secures financial continuity and provides for care in ways that direct beneficiary designations cannot accomplish on their own.
A comprehensive approach that includes an ILIT alongside revocable trusts, wills, and powers of attorney offers multiple benefits: potential estate tax mitigation, protection from probate delays, controlled distributions, and continuity of financial management for beneficiaries. By coordinating documents, families reduce the risk of conflicting instructions and help ensure that trusts and beneficiary designations work together. For Woodland Hills homeowners and business owners, thorough planning can ease transitions after death and support long-term family stability by addressing funding, trustee selection, and contingency provisions.
Comprehensive planning also helps reduce uncertainty for surviving family members by clarifying who will manage assets, how proceeds will be used, and what steps are required to access funds. Including provisions such as HIPAA authorizations and guardianship nominations ensures decision-makers can act promptly when medical or custody issues arise. An integrated plan improves administrative efficiency and provides guidance that trustees and family members can rely on during difficult times, making the distribution and management of life insurance proceeds more predictable and aligned with the grantor’s values.
An ILIT can reduce the size of a taxable estate by removing life insurance proceeds from estate inclusion, helping to minimize potential estate taxes for larger estates. In addition, trusts generally avoid probate, which can speed asset distribution and preserve privacy. These features can be particularly valuable to families seeking orderly transfer plans and preservation of wealth across generations. It is important to integrate the ILIT with other estate documents to ensure beneficiary designations and trust funding work together and produce the desired tax and probate outcomes.
A well-drafted ILIT allows the grantor to specify how proceeds are distributed, whether in lump sums or over time, and can set standards for use such as education, healthcare, or living expenses. This control helps protect beneficiaries from creditors, poor money management, or unintended disinheritance. Trust provisions can also provide flexibility for changing family dynamics by naming alternate beneficiaries and successor trustees, ensuring that the grantor’s intentions are carried out even if circumstances change after the trust is created.
Proper timing and funding are essential when establishing an ILIT. Transfers of existing policies can trigger the three-year rule, which may cause proceeds to be included in the insured’s estate if death occurs within three years of transfer, so planning well in advance helps avoid this risk. Funding trustee premium payments and documenting gifts helps maintain clear records for tax and administrative purposes. Discuss premium payment methods, gift tax implications, and potential use of Crummey powers to ensure that the ILIT functions as intended and aligns with the larger estate plan.
An ILIT should not exist in isolation. Coordinate beneficiary designations, pour-over wills, revocable living trusts, HIPAA authorizations, and powers of attorney to avoid conflicts and ensure that the overall plan reflects current family goals. Review all documents periodically and after major life events such as birth, marriage, divorce, or death. Clear alignment across documents creates a cohesive plan that reduces administrative burdens and clarifies how life insurance proceeds will be used within the broader estate strategy.
Residents often consider an ILIT to achieve tax planning objectives, protect proceeds from probate, and set clear distribution instructions for heirs. Individuals with sizeable life insurance policies or complex family situations—such as blended families or beneficiaries with special financial needs—may find that an ILIT provides structure and safeguards that beneficiary designations alone cannot deliver. An ILIT can preserve family wealth and help ensure that insurance proceeds support long-term goals like education funding, debt repayment, or the continuation of a family business.
Other reasons to consider an ILIT include minimizing disputes among beneficiaries, preserving privacy by avoiding probate, and ensuring a trusted third party manages life insurance proceeds on behalf of heirs. An ILIT also enables specific timing of distributions and conditions for the release of funds, which can be especially helpful when beneficiaries are young or have a history of financial vulnerability. Consulting about how an ILIT fits with existing trusts, wills, and powers of attorney can help determine whether this trust is appropriate for your situation.
Several circumstances often point toward using an ILIT: high-value life insurance policies where estate tax mitigation is a concern, beneficiaries who require structured financial protection, desire to avoid probate, and families seeking to manage liquidity for estate settlement costs. Business owners may also use ILITs to ensure continuity by providing buy-sell funding or protecting proceeds for partners. A careful review of family dynamics, asset composition, and long-term goals helps determine whether an ILIT will provide meaningful benefits relative to simpler arrangements.
When life insurance policies are large relative to overall estate size, transferring a policy into an ILIT can help reduce the taxable estate and provide liquidity to pay estate taxes without forcing the sale of other assets. Planning should consider timing, potential gift tax consequences, and the three-year rule to ensure the transfer achieves its intended benefits. Properly coordinated ILITs can protect family wealth and provide a mechanism to preserve long-term holdings, such as real estate or business interests, by supplying necessary liquidity upon the insured’s death.
Families with minor children or beneficiaries who may need assistance with financial management often use ILITs to set conditions on distributions, appoint a trustee to manage funds, and protect assets from creditors or poor decisions. An ILIT can specify how funds are used for education, health care, or living expenses, and it can provide ongoing oversight rather than a single lump-sum distribution. This structure helps ensure that proceeds are used in ways that support the beneficiary’s long-term well-being and align with the grantor’s intentions.
Business owners sometimes rely on ILITs to fund buy-sell agreements or provide liquidity for a business transition after an owner’s death. By placing policies in a trust, proceeds can be allocated according to the plan and used to support continuity or buyout arrangements without causing estate fragmentation. ILITs can also preserve legacy assets for the next generation and provide structure for succession planning. Integrating business succession documents with the ILIT helps ensure the plan supports both family and business goals effectively.
The Law Offices of Robert P. Bergman offers estate planning services to Woodland Hills residents, including drafting and administering ILITs, revocable living trusts, pour-over wills, powers of attorney, and healthcare directives. We guide clients through selecting trustees, funding trusts, and coordinating beneficiary designations. Our goal is to simplify complex choices by providing clear explanations, practical options, and thorough document drafting to reflect each client’s objectives. Whether you are establishing an ILIT to manage life insurance or updating your overall plan, we assist with tailored solutions for your family and financial needs.
Choosing a legal advisor for ILIT planning means working with a firm that understands the practical and tax considerations involved in trust ownership of life insurance. We help clients evaluate whether an ILIT aligns with broader estate goals, coordinate transfers and premium funding, and craft trust provisions that reflect specific family priorities. Our approach emphasizes clear communication, detailed drafting, and attention to timing to avoid unintended tax consequences. We work with clients across Los Angeles County, including Woodland Hills, to create plans that balance control, protection, and administrative ease for trustees and beneficiaries.
Our services include reviewing existing insurance ownership and beneficiary designations, advising on trustee selection, preparing trust agreements and ancillary documents like certification of trust and HIPAA authorization, and guiding trustees through administration after the grantor’s passing. We also coordinate with financial advisors and insurance agents when appropriate to ensure funding mechanisms and policy structures support the plan. Clients receive practical advice on recordkeeping, funding strategies, and periodic review to keep documents current with family changes and legal developments.
We recognize that every family’s circumstances are different, so we tailor ILIT provisions to fit unique needs such as education funding, business continuity, or protection of vulnerable beneficiaries. Our goal is to make the legal process straightforward while producing durable documents that trustees can administer confidently. If you are considering an ILIT or updating an existing estate plan in Woodland Hills, we offer thoughtful planning and careful drafting to help achieve long-term family and financial objectives.
Our ILIT process begins with an initial consultation to review your goals, current policies, and family circumstances. We then recommend an approach, draft the trust and related documents, and coordinate policy transfers or trust purchases. After the trust is funded, we provide guidance on trustee duties, premium funding mechanics, and recordkeeping. We also offer post-creation review services to adjust the plan as circumstances change. Throughout, we focus on providing clear instructions to trustees and beneficiaries to ensure the trust operates smoothly when it is needed most.
During the first step we review existing life insurance policies, beneficiary designations, estate documents, and family goals to determine whether an ILIT is appropriate. We discuss funding options for premiums, trustee selection, the implications of transferring policies, and potential tax considerations such as gift tax effects and the three-year rule. This stage establishes the framework for the trust and identifies any additional planning that may be needed, such as coordinating revocable trusts, wills, or guardianship nominations to ensure a cohesive plan.
We collect policy statements, beneficiary designation forms, existing trust and will documents, and financial information to create a full picture of the estate plan. This review identifies conflicts, outdated designations, or funding gaps that could affect the ILIT’s effectiveness. Gathering accurate information early enables proper drafting and helps prevent unintended tax or administrative consequences. We also discuss family dynamics and long-term goals so the trust terms reflect how you want proceeds to be used and managed after your death.
After reviewing relevant documents, we outline recommended strategies for setting up the ILIT, including trustee options, funding mechanisms such as annual gifts, and provisions for distributions. We explain the legal and tax considerations in plain language and provide alternatives to ensure you understand the trade-offs. The recommendations are tailored to your circumstances and aligned with other estate planning tools to avoid contradictory instructions and to achieve the intended estate and family outcomes.
Once a strategy is selected, we prepare the ILIT document and any supporting paperwork required to transfer or purchase the life insurance policy. We ensure the trust includes clear trustee powers, successor trustee provisions, and detailed distribution instructions. If an existing policy is transferred, we coordinate with the insurance carrier to complete ownership change forms and confirm the transfer. We also advise on the most appropriate method to fund premiums and document gifts to the trust to support ongoing administration and compliance with tax rules.
Drafting focuses on clear, enforceable provisions tailored to the grantor’s objectives, including distribution standards, trustee authorities, and contingencies for changes in beneficiary circumstances. We prepare the execution package and walk you through signing, notarization, and initial steps to fund the trust. Accurate execution and proper funding documentation help ensure the trust functions as intended and minimizes the risk of unintended estate inclusion or administrative complications.
If transferring an existing policy to the ILIT, we coordinate the necessary forms with the insurance company and confirm changes in ownership and beneficiary designations. If the trust purchases a new policy, we work with financial advisers and agents to ensure the trust is correctly named as owner and beneficiary. Either approach requires careful recordkeeping and timely completion of paperwork to document the transfer and ensure the trust is properly funded for premium payments.
After the ILIT is established and funded, trustees must follow administrative duties such as maintaining records, paying premiums, making distributions, and providing beneficiary notices as required by the trust. We provide guidance for trustees to fulfill those responsibilities and offer ongoing review services to adapt to life changes. Periodic reviews help address new policies, changes in family structure, or significant financial events to keep the plan aligned with current goals and legal requirements.
Trustees should keep accurate records of premium payments, gifts used to fund the trust, any income or expenses of the trust, and distributions to beneficiaries. Proper recordkeeping supports tax compliance and helps heirs understand the trust’s administration. We provide trustees with templates and practical advice for maintaining trust records, responding to beneficiary inquiries, and coordinating with financial institutions or advisors to administer trust assets effectively.
Although an ILIT is irrevocable, related estate planning elements such as wills, revocable trusts, and powers of attorney should be reviewed periodically. Changes in family status, tax law, or asset composition may require updates to beneficiary designations or other documents connected to the ILIT. We assist clients with periodic reviews to ensure the entire estate plan continues to meet goals, recommending adjustments to funding strategies or related documents as appropriate to keep the plan effective and well-coordinated.
An Irrevocable Life Insurance Trust is a trust specifically designed to own a life insurance policy and receive policy proceeds upon the insured’s death. The trust becomes the legal owner of the policy, with a trustee responsible for managing premium payments, recordkeeping, and following distribution instructions for named beneficiaries. Because the trust is irrevocable, ownership transfers are typically final, which is why careful planning and documentation are important to achieve estate planning goals and avoid unintended consequences. Once the policy is owned by the ILIT, proceeds are paid into the trust at death and then distributed according to the trust terms. This arrangement can help avoid probate and provide control over timing and conditions of distributions. The ILIT’s administration involves ongoing duties such as maintaining records, communicating with beneficiaries, and ensuring premium funding, and it should be integrated with other estate documents to ensure consistency and effectiveness.
Transferring a life insurance policy to an ILIT can remove the policy proceeds from the grantor’s taxable estate, potentially reducing estate taxes for larger estates. The transfer must be completed in a manner that satisfies applicable tax rules and avoids pitfalls such as the three-year inclusion rule. For some clients, an ILIT is a practical component of broader tax planning, but the benefits vary based on total estate size, policy value, and timing of the transfer. It is important to evaluate gift tax consequences when funding premiums to the ILIT and to keep clear records of gifts and premium payments. Coordination with a broader plan, including trusts and beneficiary designations, helps ensure the ILIT accomplishes the intended tax and distribution outcomes. Each situation requires a fact-specific analysis to determine whether an ILIT will deliver meaningful tax advantages.
Naming a spouse as trustee is possible but requires careful consideration. If a spouse is given ownership-like control over the policy through trusteeship or access to trust assets, the arrangement might jeopardize the goal of keeping proceeds out of the insured’s estate. In many cases, appointing an independent trustee or a corporate trustee as co-trustee can preserve separation between the insured’s estate and the trust assets while still allowing the spouse to benefit under the trust terms. Naming a spouse as beneficiary is common, and an ILIT can be drafted to allow the spouse to receive income or principal under specified conditions. Structuring distributions and trustee powers thoughtfully helps achieve the intended beneficiary support while maintaining the trust’s estate planning objectives. Each plan should be tailored to family circumstances and tax considerations.
The three-year rule refers to a federal tax provision that can include life insurance proceeds in an insured’s estate if the insured transfers ownership of a life insurance policy within three years of death. If this occurs, the intended benefit of removing the policy from the taxable estate may be negated. Because of this rule, transferring an existing policy to an ILIT shortly before a reasonably foreseeable death creates the risk that proceeds will still be treated as part of the estate. To address this, clients often plan well in advance of anticipated need or use alternative funding strategies. For individuals nearing end of life, other planning techniques may be more appropriate. Careful timing, documentation, and coordination with other estate planning steps help manage the implications of the three-year rule.
Premiums for an ILIT-owned policy are typically funded by gifts from the grantor to the trust, which the trustee then uses to pay premiums. These gifts may qualify for the annual gift tax exclusion if notice and withdrawal rights are properly provided to beneficiaries under Crummey provisions, subject to applicable rules. Proper documentation of gifts and premium payments is essential for tax and administrative records and helps demonstrate the legitimacy of the funding plan. Alternative funding arrangements can include using existing liquid assets, annual exclusion gifts, or coordinating with financial planning strategies to ensure premiums are paid without creating adverse tax consequences. Advisors may work with insurance agents and financial professionals to structure payments in a manner that supports the trust’s sustainability and aligns with overall estate planning objectives.
After the insured’s death, the trustee’s duties include filing claims with the insurance company, receiving proceeds, and administering distributions in accordance with the trust document. The trustee also handles administrative tasks such as paying any trust expenses, maintaining records of transactions, and communicating with beneficiaries to explain distribution timing and terms. Trustees may need to coordinate with accountants or advisors regarding tax reporting and with courts or other parties if disputes arise. Trustees should maintain transparent records, follow the trust’s instructions carefully, and act in the beneficiaries’ best interests. If beneficiaries have questions or concerns, the trustee should provide documentation and an explanation of decisions. Professional trustees or advisory support can assist individual trustees unfamiliar with administrative responsibilities to ensure the trust operates smoothly and according to the grantor’s intent.
An ILIT can play a role in business succession planning by providing liquidity for buy-sell agreements or ensuring funds are available to support a transition after an owner’s death. When structured to own a policy on a business owner’s life, the trust can distribute proceeds to business partners or families aligned with succession objectives. Funding a buy-sell arrangement through an ILIT can help prevent forced sales of business interests to pay estate taxes or meet other obligations. Coordination with business agreements, buy-sell documents, and business valuation strategies is important to ensure proceeds are used as intended. Parties should align the ILIT provisions with corporate governance documents and agreements so distributions support continuity, fair compensation to remaining owners, and preservation of the business as part of an overall transition plan.
An ILIT should be coordinated with a revocable living trust and a pour-over will so that all estate documents reflect consistent beneficiary designations and distribution intentions. While a revocable trust governs assets owned during the grantor’s lifetime and can be amended, the ILIT remains irrevocable and focuses specifically on life insurance ownership and distribution. Ensuring the documents are aligned prevents contradictory instructions and reduces the chance of disputes among heirs or administrative complications. A pour-over will can direct assets not already titled in the revocable trust into the primary trust at death, but it does not change how an ILIT operates. Regular reviews of all documents after major life events or changes in law help maintain coherence across the estate plan and support efficient administration when trustees or executors act.
Once an ILIT is established and funded with a transferred life insurance policy, changing beneficiaries of the trust itself is typically restricted because the trust is irrevocable. However, the grantor can structure the trust initially to allow flexibility through contingent beneficiaries or mechanisms for modifying distributions under limited circumstances. If beneficiaries must be changed for legitimate reasons, parties may explore legal options such as decanting or court modification where allowed, but these approaches depend on the trust terms and applicable state law. If the grantor wishes to change who receives policy proceeds in the future, careful planning before establishing the trust is preferable. Drafting flexible provisions or naming multiple tiers of beneficiaries can accommodate future changes without risking the trust’s irrevocable nature. Consultation early in the process helps create a trust that balances permanence with reasonable adaptability for anticipated family developments.
Reviewing an ILIT and the surrounding estate plan periodically is important to ensure documents remain aligned with family circumstances, changes in law, or financial events. Significant life changes — such as marriage, divorce, births, deaths, or major changes in assets — warrant timely review. Even absent major events, an annual or biennial review can help identify issues like outdated beneficiary designations or changes in policy performance that may affect the plan’s effectiveness. Ongoing reviews also allow for adjustments in funding strategies and trustee arrangements. While the ILIT itself is irrevocable, related documents and administrative practices can often be improved to support the trust’s goals. Regular consultation with your attorney and financial advisors helps maintain a coherent plan that continues to meet your intentions and the needs of your beneficiaries.
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