An irrevocable life insurance trust (ILIT) can be a powerful component of a thoughtful estate plan for residents of Costa Mesa and Orange County. An ILIT holds a life insurance policy outside of a grantor’s taxable estate, which may reduce estate tax exposure for larger estates and help ensure that beneficiaries receive proceeds without delays commonly associated with probate. Creating an ILIT involves trust drafting, funding, trustee selection, and coordination with insurance carriers to transfer or purchase a policy within trust ownership. This overview explains key considerations when evaluating whether an ILIT fits your family and financial goals.
Selecting the right structure and terms for an ILIT requires careful planning around timing, gift tax implications, and trust provisions that align with your long-term wishes. Important elements include who will serve as trustee, how trust distributions will be managed, and whether the trust should include provisions for education, health care, or special needs support. In many situations an ILIT is paired with other estate planning documents such as revocable living trusts, pour-over wills, powers of attorney, and healthcare directives to create a cohesive plan that protects assets, preserves value, and provides for heirs according to your intentions.
An ILIT offers several benefits that can be particularly valuable for families with significant life insurance policies or larger estates. By keeping the insurance policy and its proceeds outside of your personal taxable estate, an ILIT can help minimize estate tax exposure and preserve liquidity to cover taxes, debts, or other obligations. An ILIT also provides a method to control how insurance proceeds are paid out, establish protections for minor beneficiaries, and shield assets from creditors in certain circumstances. Proper administration and funding are essential to realize these benefits and avoid unintended tax consequences.
The Law Offices of Robert P. Bergman assist California families with estate planning tools including irrevocable life insurance trusts, revocable living trusts, wills, powers of attorney, and healthcare directives. Our approach emphasizes clear communication, careful drafting, and practical administration to align legal solutions with each client’s personal and financial priorities. We work with clients in Costa Mesa and across Orange County to design plans that address tax considerations, beneficiary needs, and long‑term asset stewardship, coordinating with financial and insurance advisors as necessary to implement durable estate strategies.
An irrevocable life insurance trust is a legally binding arrangement in which the grantor transfers ownership or causes the trust to own a life insurance policy on the grantor’s life. Once established and properly funded, the trust holds the policy and receives benefits when the insured passes away. Because the trust owns the policy, proceeds typically do not pass through probate and may be excluded from the insured’s taxable estate if certain timing and gift rules are satisfied. Careful attention to the transfer timing and gifting procedures is essential to achieve the intended estate planning objectives.
Establishing an ILIT generally requires drafting trust documents with specific terms for trustee powers, distribution standards, and beneficiary designations. The grantor must also consider whether to transfer an existing policy into the trust or have the trust purchase a new policy, and each option has different tax and practical consequences. Additionally, the trust must be funded correctly, often through annual gifts to trust beneficiaries that enable them to pay the policy premiums. A well-structured ILIT addresses these administrative obligations and anticipates future changes in family circumstances or tax law.
An irrevocable life insurance trust is a separate legal entity that owns and manages a life insurance policy for the benefit of named beneficiaries. Once the grantor transfers ownership or has the trust purchase the policy, the terms of the trust generally cannot be changed without court intervention, which is why the trust is considered irrevocable. The trust agreement sets the rules for how proceeds are used, whether for lump-sum distributions, installment payments, education expenses, or other specified purposes. Because the trust controls the policy, the proceeds can be distributed according to the grantor’s wishes while avoiding probate delays.
Creating an ILIT typically involves drafting the trust instrument, naming trustees and beneficiaries, determining funding methods, and coordinating the ownership and beneficiary designations with the life insurance carrier. Additional steps include preparing required gift tax filings when contributing funds for premiums, establishing annual gifting strategies, and documenting donor intent to satisfy tax regulations. Trustees should understand reporting responsibilities and how to manage trust assets, including receiving and investing proceeds after a policy payout. Clear trustee provisions help ensure timely payments and distributions consistent with the grantor’s goals.
This glossary defines common terms you’ll encounter when discussing irrevocable life insurance trusts and related estate planning tools. Understanding these terms helps you make informed choices about drafting trust provisions, funding decisions, and coordinating with other estate planning documents like wills, revocable living trusts, and powers of attorney. Familiarity with trustee duties, gift tax rules, and beneficiary designations is especially helpful when implementing an ILIT so that the trust functions as intended and provides the desired asset protection and tax treatment.
The grantor is the person who creates the trust and transfers assets or ownership of a life insurance policy into it. In the context of an ILIT, the grantor usually removes policy ownership from their personal estate by placing the policy in trust. While the trust is in effect, the grantor may not retain powers that allow control over the policy or trust assets, because doing so could cause the policy proceeds to remain taxable within the grantor’s estate. Choosing clear, irrevocable terms at creation helps preserve the intended tax benefits.
The trustee is the individual or institution responsible for administering the trust according to its terms and applicable law. Trustees are charged with managing the policy, making premium payments, receiving proceeds upon the insured’s death, and distributing funds to beneficiaries as directed by the trust. The trustee also handles reporting, tax filings, and records maintenance. Selecting a trustee who understands fiduciary duties and administrative obligations helps ensure that the trust operates smoothly and that distributions reflect the grantor’s wishes.
Irrevocable indicates that once the trust is established and funded, the grantor generally cannot unilaterally change the trust’s terms or reclaim assets placed in the trust. This permanence is fundamental to the ILIT’s function because removing the policy from the grantor’s estate depends on relinquishing ownership and control. The irrevocable nature provides predictability for beneficiaries and can create tax and creditor protections, but it also means the grantor should carefully consider the trust’s provisions and funding strategy before finalizing the document.
A Crummey power is a limited right that gives trust beneficiaries a short period to withdraw gifts made to the trust, which helps qualify those gifts for the annual gift tax exclusion. For an ILIT that receives annual contributions to pay policy premiums, including Crummey withdrawal notices can be an important administrative step to ensure the gifts are treated as present interest gifts under tax rules. Proper documentation and timing of notices support the intended tax treatment, while trustees must balance notification procedures with the trust’s long-term planning goals.
When evaluating an ILIT, it is helpful to compare it with other estate planning options such as retaining the policy in the personal estate, using a revocable trust, or relying on beneficiary designations alone. Keeping a policy in a personal estate may simplify administration but can increase estate tax exposure. A revocable trust offers flexibility but generally does not remove the policy from the taxable estate while the grantor is alive. An ILIT often achieves tax and probate advantages that other approaches cannot, though it requires ongoing administration and careful coordination with gift and tax rules.
For individuals whose total estate falls well below federal and state estate tax thresholds, the costs and administrative responsibilities of an ILIT may outweigh the potential benefits. If the primary goal is straightforward beneficiary designation and modest liquidity for final expenses, maintaining a life insurance policy within the personal estate or relying on a revocable trust may be appropriate. In such circumstances, a simpler plan can provide clarity and ease of administration while still addressing basic distribution goals and end-of-life arrangements.
When planning needs are temporary or transitional—such as covering short-term debts or providing immediate cash for end-of-life expenses—less complex arrangements can be effective. For example, a policy owned personally may be easier to manage when timing or cost constraints make establishing an irrevocable trust impractical. Similarly, updating beneficiary designations or revising a revocable living trust might address immediate concerns without the long-term commitments that accompany an ILIT. Choosing the right approach depends on goals, time horizon, and the potential tax implications.
A comprehensive planning approach considers how various tools work together to protect wealth and provide necessary liquidity to cover taxes, debts, and family needs when a loved one passes. An ILIT can play a central role in that plan by supplying funds that bypass probate delays and are managed according to specific distribution rules. When combined with revocable trusts, wills, powers of attorney, and healthcare directives, a comprehensive plan addresses both immediate practical needs and long-term legacy objectives while reducing the risk of unintended consequences from piecemeal planning.
Families with blended relationships, beneficiaries who are minors or have special needs, or significant business and real estate holdings often benefit from a coordinated plan that includes an ILIT among other documents. A full planning review allows for drafting provisions that protect vulnerable beneficiaries, provide staged distributions, and integrate life insurance proceeds with other assets. Such coordination reduces the likelihood of disputes, supports smoother transitions of wealth, and helps ensure that estate resources are used in ways that reflect the grantor’s intentions.
Integrating an ILIT into a broader estate plan can enhance financial security for beneficiaries and provide liquidity when assets are otherwise illiquid at death. Life insurance proceeds placed in a trust can pay estate taxes or debts, equalize inheritances among heirs, and fund family needs without forcing the sale of business interests or real property. When trust provisions are carefully drafted, proceeds can be distributed in ways that support education, healthcare, or long-term financial stability for beneficiaries while maintaining control over timing and usage.
A coordinated estate plan that includes an ILIT also helps reduce uncertainty and administrative burden for surviving family members by clarifying trustee authority and distribution standards. Maintaining consistent beneficiary designations across insurance policies, retirement accounts, and trust documents prevents unintended results and simplifies transitions. Additionally, documented gift strategies and trust funding plans reduce the risk of tax surprises and support orderly trust administration, which can minimize disputes and ease the emotional and logistical strain on those responsible for carrying out your wishes.
One primary benefit of an ILIT is its potential to keep life insurance proceeds out of the grantor’s taxable estate when properly implemented. This can provide liquidity to pay estate taxes without requiring the sale of property or business interests, and it often allows quicker access to funds because proceeds paid to a trust typically avoid probate. These features preserve the value of other estate assets and provide heirs with timely resources to meet financial obligations during the transition period following a death.
An ILIT lets the grantor set clear rules for how insurance proceeds will be used and distributed, which can protect beneficiaries from mismanagement and provide safeguards for minor or financially inexperienced heirs. Trust provisions can specify staggered payments, education funding, or allotments for healthcare and housing, while limiting direct access that could expose funds to creditors or divorce claims. These distribution controls help ensure that insurance benefits support long-term family goals and provide a predictable framework for trustees to follow when administering the trust.
Transferring an existing policy into an ILIT or having a trust purchase a new policy requires attention to timing and transfer rules to achieve the intended tax treatment. If a policy is transferred into trust ownership, a three-year rule can apply that may cause the death benefit to remain in the grantor’s estate if the insured dies within three years of the transfer. Planning ahead allows you to address this timing concern and implement funding strategies that minimize unintended tax consequences while ensuring the trust can receive premium contributions as needed.
An ILIT should be integrated with the rest of your estate plan, including revocable living trusts, pour-over wills, powers of attorney, and healthcare directives, to maintain consistency and avoid conflicting beneficiary designations. Working with financial or insurance advisors to confirm policy details and with tax advisors to manage gift tax filings supports a cohesive plan. Documentation that records your intent, funding sources, and coordination steps helps trustees and family members carry out your wishes without confusion during a difficult time.
Consider an ILIT if you carry significant life insurance that you wish to exclude from your taxable estate, need liquidity at death for taxes or business succession, or want to control how life insurance proceeds are distributed to heirs. An ILIT can be particularly helpful for individuals with larger estates, owners of closely held businesses, or those with beneficiaries who require structured distributions. Evaluating your overall estate size, beneficiary needs, and long-term financial goals will clarify whether an ILIT is an appropriate tool to include in your planning.
An ILIT may also be beneficial when you want to protect proceeds from probate delays or creditor claims, or when you seek to provide predictable support for education, healthcare, or other family expenses. Implementing an ILIT requires ongoing administration, including annual funding and recordkeeping for tax and trustee purposes, so it is most effective when you have clear objectives and a willingness to follow through with the necessary funding and documentation. Thoughtful coordination with other plan components increases the likelihood of achieving your goals.
Typical circumstances that lead clients to establish an ILIT include estate tax planning for larger estates, protecting life insurance proceeds from probate, providing liquidity for business succession, and ensuring controlled distributions to beneficiaries who may be minors or face financial vulnerability. Other considerations include desire to equalize inheritances among heirs, to provide for long‑term care or special needs without jeopardizing public benefits, or to support charitable objectives while minimizing taxable estate exposure. Each situation benefits from tailored trust provisions and funding plans.
When an estate’s size approaches thresholds for federal or state estate taxes, an ILIT can be an effective vehicle to remove life insurance proceeds from the taxable estate, providing liquidity to cover tax liabilities and preserving other assets for heirs. Planning in advance allows for proper transfer timing, gift documentation, and coordination with other tax planning strategies. For families with business interests or concentrated real estate holdings, the liquidity from an ILIT can prevent forced sales and support orderly succession planning without disrupting ongoing operations.
An ILIT is often used to manage how life insurance proceeds are distributed to beneficiaries who may be too young, inexperienced, or vulnerable to receive a lump sum. Trust provisions can impose conditions on distributions, schedule staggered payments, or allocate funds for specific purposes like education or healthcare. These controls protect proceeds from being dissipated quickly and can shield funds from creditors or divorce proceedings depending on trust wording and applicable law, thereby aligning distributions with the grantor’s long-term intentions.
For business owners, an ILIT can provide necessary liquidity to facilitate buy-sell agreements, fund a business succession plan, or cover debts and taxes without undermining operational stability. Life insurance proceeds owned by a trust can be used to compensate family members or business partners, support estate settlement costs, and enable a smoother transition of ownership. Coordinating the trust with corporate documents and buy-sell arrangements ensures that proceeds are accessible when needed and distributed according to the broader succession strategy.
The Law Offices of Robert P. Bergman provide ILIT planning and related estate services to families and business owners in Costa Mesa and throughout Orange County. We assist in drafting trust documents, coordinating policy transfers or trust purchases, establishing funding plans, and preparing necessary gift tax filings. Our goal is to implement practical, well-documented plans that align with your priorities while minimizing administrative burdens for your family. We also help trustees understand their duties and maintain records to support efficient trust administration after a policy payout.
Clients choose our firm for practical guidance, clear drafting, and careful coordination with insurance and financial advisors to implement ILITs that reflect their intentions. We focus on creating durable trust documents, funding strategies, and administrative protocols that reduce the likelihood of unintended tax consequences or probate delays. Our process emphasizes open communication, thoughtful planning around trustee responsibilities, and documentation that supports the trust’s legal and tax treatment, all tailored to the needs of Costa Mesa and Orange County residents.
Our team helps clients weigh the pros and cons of transferring existing policies into trust versus having a trust purchase a new policy, and we assist with the practical steps to fund premiums and provide required notices to beneficiaries when applicable. We coordinate with carriers, financial advisors, and family members to ensure beneficiary designations and other documents align with the trust’s terms. Clear implementation and ongoing administrative guidance help trustees fulfill their duties effectively and preserve the grantor’s intended legacy.
We also prioritize accessibility and responsiveness, providing guidance that addresses common pitfalls such as timing transfers to avoid the three-year inclusion rule and documenting gifts to support annual exclusion claims. For families managing business succession, special needs concerns, or blended family dynamics, we work to draft provisions that balance protection and flexibility. Our objective is to help clients in Costa Mesa create ILITs that support long-term financial stability and clear, enforceable distribution rules for beneficiaries.
Our legal process for ILIT planning begins with a comprehensive intake that reviews assets, insurance policies, family structure, and long-term goals. We assess whether transferring an existing policy or having a trust purchase a new policy best meets your objectives, then draft the trust with clear trustee powers, distribution rules, and funding instructions. We coordinate with insurance carriers to transfer ownership or set up new policies, prepare any required tax filings, and provide the documentation and procedural instructions trustees need for ongoing administration and compliance.
Step one involves understanding your personal and financial situation, including policy details, beneficiaries, estate size, and any business or special needs considerations. This review identifies the most effective strategy for achieving your objectives, whether that includes creating a new ILIT, transferring an existing policy, or integrating life insurance planning with other estate documents. We discuss the timing implications, funding mechanics, and trustee selection to ensure the chosen approach aligns with your goals and circumstances.
During the initial phase we gather detailed information about existing insurance policies, retirement accounts, and other estate assets to determine how an ILIT should be funded and integrated with your plan. Accurate documentation helps identify which assets may require beneficiary updates or coordination with trust provisions. This step also allows us to identify potential issues such as policy loan balances, contingent beneficiaries, or ownership clauses that could affect a transfer into the trust or the trust’s ability to benefit from the policy proceeds.
We analyze potential tax implications, gift planning requirements, and funding mechanisms to determine the most appropriate approach for establishing an ILIT. This includes evaluating whether annual gifts to the trust will be structured to qualify for the annual gift tax exclusion and deciding whether Crummey notices or other administrative steps are necessary. Our goal is to implement a funding strategy that supports premium payments and maintains the intended tax treatment while aligning with your broader estate planning priorities.
Once the strategy is chosen, we prepare the trust document with clear provisions addressing trustee authority, beneficiary distribution rules, and rules for handling policy ownership and proceeds. The trust instrument also includes successor trustee appointments, provisions for dealing with contested claims, and guidelines for trust investments if proceeds are to be held or managed by the trustee. Properly executed trust documents and related insurance paperwork create the legal framework necessary for effective administration and tax treatment.
We work with you and the insurance carrier to arrange for either transferring an existing policy into the trust or having the trust purchase a new policy. This coordination includes updating ownership and beneficiary designations, confirming any insurability or underwriting issues, and documenting the transfer date to address timing rules. Clear instructions and communication with the carrier reduce the risk of administrative problems and help ensure that the trust becomes the rightful owner of the policy according to the plan.
To support ongoing premium payments, we implement a funding plan that may include annual gifts to trust beneficiaries or direct contributions, accompanied by appropriate documentation and notices where required. Preparing records of gifts and Crummey notices and advising trustees on how to handle withdrawal periods preserves the intended tax treatment and provides a clear administrative trail. Detailed recordkeeping also helps trustees meet reporting obligations and eases future trust administration tasks.
After formation, trustees must manage premium payments, maintain records of gifts and notices, and be prepared to receive and distribute proceeds when the insured passes. Ongoing maintenance may include periodic reviews to confirm policy terms remain appropriate, trustee succession planning, and updates to beneficiary designations on related accounts. Regular communication among trustees, beneficiaries, and advisors helps preserve the trust’s benefits and ensures the plan continues to reflect changing family or financial circumstances over time.
When the policy pays out, trustees must promptly file claims with the carrier, collect proceeds, manage any tax filings or notices, and follow the trust’s distribution instructions. Trustees should also maintain detailed records of receipts and disbursements and coordinate with beneficiaries to implement distributions consistent with the trust terms. Effective administration at this stage ensures funds are available for the intended uses, whether to provide income, pay debts, or make transfers as the grantor directed, and helps avoid disputes among heirs.
While an ILIT itself is irrevocable, other estate planning documents and beneficiary designations may require periodic review and updates. Trustees and grantors should confirm that associated plans—such as revocable living trusts, wills, advance directives, and powers of attorney—remain coordinated with the ILIT’s objectives. Regular reviews accommodate life changes such as births, deaths, marriages, or changes in financial status and help maintain a cohesive plan that functions smoothly when needed.
An irrevocable life insurance trust is a trust that owns a life insurance policy and holds the proceeds for the benefit of named beneficiaries according to the trust’s terms. Unlike personal ownership where the policy and proceeds are part of your probate estate, an ILIT typically removes the policy from personal ownership so proceeds pass to the trust and are distributed outside probate. The trust document sets trustee powers, distribution rules, and any conditions for payouts. Proper drafting and administration are essential to realize the intended probate and tax advantages. Establishing an ILIT also involves practical steps such as naming trustees and beneficiaries, arranging ownership transfers or policy purchases, and ensuring that funding mechanisms are in place to pay premiums. The grantor must avoid retaining powers that would cause the policy to remain taxable in the estate. Trustees must maintain records, handle notices when annual gifts are made, and coordinate with the carrier to manage policy ownership and claims at the time of death.
Transferring a policy into an ILIT can remove it from your taxable estate, but certain timing and control rules affect that outcome. Generally, if you transfer an existing policy into an ILIT and die within three years of the transfer, the policy proceeds may still be included in your estate for tax purposes. This three-year rule requires careful timing and planning when transferring ownership of existing policies. Additionally, retaining certain powers over the policy can cause estate inclusion, so the trust must be structured to avoid those retained rights. To achieve the desired tax result, many clients choose to have the ILIT purchase a new policy directly owned by the trust or transfer an existing policy well in advance of any anticipated changes in health or mortality risk. Proper coordination with financial and insurance advisors helps ensure the transfer or purchase timing and documentation align with tax objectives and the overall estate planning strategy.
An ILIT can be a useful tool in business succession planning by providing liquidity to fund buy-sell agreements, compensate heirs, or pay estate taxes without forcing the sale of business assets. When an ILIT holds policies on business owners, the trust proceeds can be directed to buy out an owner’s interest or support a succession plan, enabling a smoother transition of control. Clear trust provisions and coordination with corporate documents make it possible to align life insurance proceeds with business continuity goals. To be effective for succession planning, the ILIT must be coordinated with buy-sell agreements, shareholder arrangements, and valuation methods for the business. This coordination ensures that proceeds are available and distributed according to the succession plan and that tax and funding arrangements are practical. Working with advisors who understand business transition mechanics helps ensure the ILIT complements the broader succession strategy.
A trustee can be a trusted family member, friend, professional individual, or institution tasked with managing the trust according to its terms. Family members often serve as trustees when they are capable and comfortable handling administrative duties, but choosing a trustee requires considering their availability, recordkeeping abilities, and willingness to follow fiduciary obligations. Naming successor trustees and providing clear guidance within the trust instrument reduces the risk of administrative disruptions if a trustee is unable to serve. In some cases, appointing an independent trustee or co-trustee with administrative experience provides additional oversight and neutrality, especially where family dynamics or complicated asset management are involved. The key is naming someone who will act impartially, follow the trust terms, and manage communications with beneficiaries and providers. Clear documentation of trustee duties and access to professional support helps trustees fulfill their responsibilities effectively.
Crummey notices relate to a technical gift tax concept that allows annual gifts to an ILIT to qualify for the annual gift tax exclusion by providing beneficiaries a short period to withdraw the gift. For ILITs that require annual contributions to pay premiums, issuing Crummey withdrawal notices helps establish that beneficiaries received a present interest in the gift, which is necessary for exclusion treatment. This administrative step should be performed with careful attention to timing, documentation, and whether beneficiaries actually exercise withdrawal rights. Issuing notices and maintaining records supports the intended tax treatment and provides evidence of the gifting process. Trustees and grantors should understand the practical implications, including communicating how withdrawals are handled and documenting that withdrawal periods were offered. Consistent administration of Crummey procedures helps preserve the tax advantages associated with annual funding of the trust.
Premium payments for an ILIT are typically funded through annual gifts from the grantor to the trust beneficiaries, who then allow the trustee to use those gifts to pay policy premiums. These gifts are often structured to qualify for the annual gift tax exclusion, and trustees issue notices to beneficiaries when appropriate to support the exclusion treatment. In other arrangements, the grantor may directly transfer funds to the trustee for premium payments, provided the overall funding and documentation align with tax and trust rules. Trustees must maintain careful records of gifts, premium payments, and any notices sent to beneficiaries. Clear accounting helps ensure premiums are paid on time, avoids policy lapse, and provides the documentation necessary for tax reporting. Establishing an annual administrative routine for funding and recordkeeping reduces the risk of errors that could jeopardize the trust’s intended benefits.
An ILIT can be designed so that proceeds are available to support a beneficiary with special needs without disqualifying them from public benefits, but doing so requires careful drafting. A properly structured trust for a special needs beneficiary ensures that distributions are made for supplemental needs rather than basic support, and that trust assets are managed in a way that does not count as the beneficiary’s personal resources for means-tested benefits. Special language and trustee directions are typically included to preserve eligibility for programs like Medi-Cal. Coordinating an ILIT with a separate special needs trust or including specific provisions to limit direct distributions helps protect benefits while providing enhanced support. Working with advisors familiar with benefits rules ensures trust language and administration align with program requirements. Clear instructions to trustees about permissible uses and documentation practices are essential for preserving eligibility and providing reliable support for the beneficiary.
If the insured dies within three years of transferring an existing policy into an ILIT, federal tax rules may include the policy proceeds in the grantor’s taxable estate. This three-year inclusion period applies to transfers where the grantor gave up ownership but died shortly thereafter. To avoid unintended inclusion, some clients opt to have ILITs purchase new policies or plan transfers well in advance when feasible. Timing and documentation are critical to achieve the intended estate tax treatment. When transfers are made close to this three-year window, it is important to review all relevant circumstances, including any retained powers over the policy or trust. If estate inclusion applies, the proceeds may still receive other benefits of trust ownership like probate avoidance, but the tax outcome may differ from the original objective. Detailed planning and documentation help clarify the implications of transfers in proximity to the insured’s death.
An ILIT can be an effective tool to equalize inheritances among beneficiaries by providing life insurance proceeds that offset differences in other estate assets. For example, if one heir receives a family business interest, an ILIT can provide liquid funds to other heirs so distribution is balanced. The trust’s distribution provisions can be drafted to specify how proceeds are allocated to achieve parity among beneficiaries according to the grantor’s wishes. Achieving equalization requires careful integration with the overall estate plan, including valuation of illiquid assets and coordination with wills or revocable trusts. Trustees must follow the trust’s instructions and maintain transparent records to ensure distributions are handled fairly. Working through potential scenarios in advance helps ensure the ILIT accomplishes the equalization goals without causing unintended family disputes.
To start the process of setting up an ILIT in Costa Mesa, schedule an initial consultation to review your assets, existing insurance policies, family structure, and planning objectives. During this consultation you will discuss whether to transfer an existing policy or have the trust purchase a new policy, identify appropriate trustees and beneficiaries, and design a funding strategy for premium payments. Collecting policy statements and asset information ahead of time helps make the meeting productive and allows for targeted recommendations. After the initial planning session, the next steps typically include drafting the trust document with clear trustee and distribution provisions, coordinating with the insurance carrier to transfer ownership or issue a new policy, and establishing the funding and notice procedures needed to implement the plan. We provide guidance on recordkeeping and trustee duties to ensure the ILIT functions as intended and aligns with your broader estate plan.
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