An Irrevocable Life Insurance Trust (ILIT) is a common estate planning tool used to provide life insurance benefits to beneficiaries while removing the policy from the insured’s taxable estate. In Foresthill and the surrounding Placer County area, many families use an ILIT to preserve wealth for heirs, cover estate settlement costs, and ensure insurance proceeds are handled according to the settlor’s wishes. At the Law Offices of Robert P. Bergman, we focus on designing ILITs that coordinate with wills, trusts, powers of attorney, and healthcare directives to create a cohesive estate plan tailored to each client’s family dynamics and financial goals.
Deciding whether an ILIT is right for your situation requires careful planning and coordination with your broader estate planning documents. A properly drafted ILIT can protect life insurance proceeds from estate taxation, provide liquidity to pay estate expenses, and ensure the funds are distributed according to your intentions. In many cases an ILIT will work alongside other tools such as revocable living trusts, pour-over wills, and retirement plan trusts. Our approach is to review family circumstances, policy details, and long-term goals to recommend a structure that aligns with your wishes while minimizing risk and administrative burden.
An ILIT can play a key role in preserving family wealth and simplifying estate settlement. By placing a life insurance policy into an irrevocable trust, the proceeds can be kept out of the insured’s taxable estate, potentially reducing estate tax exposure while providing immediate liquidity for estate expenses, debt repayment, or ongoing family support. Beyond tax considerations, an ILIT lets the settlor control how proceeds are distributed over time, protect inheritance from creditors, and coordinate distributions with other estate planning tools. This planning technique can be especially beneficial for families with blended households, closely held business interests, or significant estate values that require orderly distribution.
The Law Offices of Robert P. Bergman provides estate planning services to clients across San Jose, Foresthill, and broader California communities. We emphasize personalized planning, listening closely to client goals to build documents that align with family needs and state law. Our firm assists with a wide range of estate planning tools including revocable living trusts, wills, powers of attorney, health care directives, and various trust arrangements. We aim to guide clients through decision points with clear explanations of options, anticipated outcomes, and practical steps to implement and maintain a plan that adapts as life circumstances change.
An Irrevocable Life Insurance Trust is a trust designed to own and receive the proceeds of a life insurance policy. Once a policy is transferred into an ILIT or the ILIT purchases a policy, the grantor typically cannot reclaim ownership, which is why these trusts are considered irrevocable. The design and timing of the transfer affect whether the proceeds will be excluded from the grantor’s taxable estate under federal and state rules. Proper drafting, timely funding, and consistent administration are essential to achieve the intended estate planning benefits while avoiding unintended tax consequences or administrative complications.
Creating an ILIT requires careful coordination with insurance carriers, trustees, and beneficiaries to ensure policy premiums are paid and trust terms reflect distribution goals. Trustees must manage trust assets and insurance policy matters according to the trust document, and gift-tax considerations may apply when transferring an existing policy or making contributions to pay premiums. Because the trust is irrevocable, clients should consider both immediate and long-term implications before establishing an ILIT. A comprehensive review of financial circumstances and policy ownership structures helps determine whether an ILIT will meet the client’s planning objectives while aligning with other estate documents.
An Irrevocable Life Insurance Trust is a legal arrangement in which the trust holds ownership of a life insurance policy on the grantor’s life and receives the policy proceeds upon the insured’s death. The trust is designed so that the proceeds will not be included in the insured’s estate, subject to timing requirements and ownership rules. The trust document names a trustee to manage the policy and distribute proceeds per the grantor’s instructions. Because the trust is irrevocable, the terms are generally fixed, making it important to set clear distribution provisions, trustee powers, and successor trustee appointments when the trust is created.
Key elements of an ILIT include the trust agreement, designation of trustee and beneficiaries, policy ownership and assignment language, premium funding provisions, and distribution instructions for proceeds. Administration requires trustees to monitor premium payments, file trust tax returns if necessary, and follow the distribution schedule set by the grantor. If an existing policy is transferred into the trust, a typical consideration is the three-year lookback rule for estate inclusion. Other processes include coordinating with insurance carriers for policy assignment or new policy issuances, maintaining trust records, and ensuring contributions are properly documented when used to pay premiums.
Understanding key terms helps clients make informed choices when considering an ILIT. Important concepts include grantor, trustee, beneficiary, assignment, gift tax, estate tax, lookback period, irrevocability, and policy ownership. Familiarity with these terms clarifies how an ILIT interacts with other estate planning tools and tax rules. A glossary provides straightforward definitions and practical implications so clients can follow conversations during planning and administration. Clear definitions also reduce confusion about responsibilities and timelines when policies are transferred or when trustees are required to act on behalf of beneficiaries.
The grantor is the person who creates the ILIT and transfers a policy or funds into the trust. The grantor’s intentions, instructions, and actions in establishing the trust determine the terms, funding method, and ultimate distribution of the insurance proceeds. Since an ILIT is irrevocable, the grantor typically cannot change the trust terms after the transfer, so careful planning is important. The grantor’s decisions also influence tax and gifting consequences, and the grantor should understand how ownership changes and premium payments affect estate inclusion and potential gift tax filings.
The trustee is the individual or entity responsible for managing the ILIT according to the trust document. Duties often include paying premiums, communicating with insurance companies, keeping accurate records, managing trust assets, and distributing proceeds to beneficiaries as directed. Trustees have fiduciary responsibilities to administer the trust in beneficiaries’ best interests, follow trust instructions, and comply with applicable law. Choosing a trustee who understands the administrative tasks and can coordinate with financial and legal professionals helps ensure the ILIT functions smoothly after the grantor’s death.
Beneficiaries are the persons or entities designated to receive the life insurance proceeds when the insured dies. The trust document specifies how and when beneficiaries receive distributions — for example, as a lump sum, in installments, or held in trust for future needs. Designating contingent beneficiaries and clarifying distribution terms helps prevent disputes and ensures the grantor’s intentions are followed. Beneficiary designations within the ILIT must be consistent with other estate documents to avoid unintended conflicts and to ensure that proceeds are managed according to the trust’s provisions.
The lookback period refers to the tax rule that can include life insurance proceeds in the grantor’s estate if the policy was transferred into an ILIT within a specified time before death, typically three years under federal estate tax rules. Proper timing and planning are essential to avoid estate inclusion, which may undermine the tax benefits of the ILIT. When a transfer falls within the lookback window, alternative strategies and coordination with other planning tools may be needed to manage potential estate tax exposure and achieve goals consistent with the grantor’s intentions.
An ILIT offers distinct benefits compared to retaining a life insurance policy in one’s personal ownership, such as potential exclusion from the taxable estate and structured distributions to beneficiaries. By contrast, other estate planning tools like revocable living trusts provide flexibility and control during the grantor’s lifetime but do not remove assets from the estate for tax purposes. Wills govern probate distributions but do not directly address life insurance ownership. Deciding among these options depends on family goals, tax considerations, liquidity needs, and the desire for creditor protection. A combined strategy often provides the best balance between control and protection.
For individuals with modest estate values and straightforward beneficiary arrangements, keeping a life insurance policy in individual ownership and coordinating beneficiary designations may be sufficient. If estate taxes are unlikely due to the estate’s size, the additional complexity and administrative requirements of an ILIT might not be necessary. In such cases, focusing on a clear will, durable power of attorney, and advance health care directive can achieve family protection and decision-making continuity without the permanence of an irrevocable trust. Each situation should be evaluated against long-term objectives and potential changes in assets or family composition.
When a client values maximum control and wants the ability to change ownership or beneficiaries during life, a revocable living trust or retaining individual ownership of a policy may be preferable. An ILIT’s irrevocable nature limits post-creation changes, which can be incompatible with plans that may evolve significantly over time. Where flexibility is more important than removing the policy from the taxable estate, a simpler arrangement that allows amendments and direct management of the policy can be appropriate. Discussing anticipated life changes helps determine whether a flexible or immutable approach is right for the client.
Comprehensive planning is particularly valuable for families with complex asset structures, blended households, or business interests that require careful coordination to ensure fair and tax-efficient distributions. An ILIT can be an important element of a broader plan that also includes revocable trusts, retirement plan planning, and special needs arrangements. By integrating documents and planning strategies, clients reduce the risk of unintended consequences, conflicts among beneficiaries, and costly probate or tax outcomes. The goal is to craft a coherent plan that anticipates future changes and protects long-term family objectives.
A comprehensive plan helps manage potential tax liability and administrative burdens that arise upon death. An ILIT can provide immediate liquidity to cover tax and settlement costs, while other planning tools can shelter assets from probate and simplify trustee or executor actions. When these components are designed to work together, administration proceeds more smoothly and beneficiaries are less likely to encounter legal or financial disputes. Thoughtful coordination of trustee duties, beneficiary instructions, and funding mechanisms reduces friction and clarifies responsibilities after the grantor’s passing.
Integrating an ILIT into a full estate plan provides several practical advantages, including coordinated distribution strategies, minimized tax exposure where applicable, and clearer administration instructions for trustees and beneficiaries. This integration ensures the life insurance proceeds complement other assets, such as retirement accounts and trusts, rather than conflicting with beneficiary designations or probate planning. Clients often appreciate that a unified plan can reduce family disputes, improve liquidity at settlement, and provide a predictable path for transferring wealth across generations while reflecting personal values and financial priorities.
A full-service planning approach also allows for contingency planning and ongoing maintenance. By addressing related documents like powers of attorney, healthcare directives, and trust certifications at the same time, clients create a consistent set of instructions for personal and financial decision-making. Regular reviews help adjust the plan as laws, family structures, or asset values change, preserving intended outcomes and reducing surprises. This proactive maintenance supports orderly transitions and helps trustees and families carry out the grantor’s wishes with less stress and administrative delay.
An ILIT can ensure liquidity is available to cover estate settlement costs, taxes, and debts without forcing sale of illiquid assets such as real estate or business interests. This benefit reduces disruption for beneficiaries and allows other assets to remain intact for their intended purposes. When combined with planning tools that coordinate ownership and beneficiary designations, the estate’s overall administrative burden is typically reduced. Trustees can follow clear directions for allocating life insurance proceeds, which prevents rushed decisions and reduces the likelihood of family disputes during the settlement process.
An ILIT offers the grantor a way to specify how insurance proceeds are distributed to beneficiaries, such as staggering payouts over time, funding education, or providing for long-term care needs. This structure can protect beneficiaries from poor financial decision making and provide for ongoing needs through trustee-managed disbursements. By combining the trust’s distribution terms with provisions like special needs trusts or spendthrift protections, the plan can preserve access to public benefits and shield funds from creditors. Clear instructions reduce ambiguity and help trustees make consistent decisions aligned with the grantor’s intentions.
Before transferring a life insurance policy into an ILIT, carefully review the current ownership and beneficiary designations. Transfers may trigger gift tax considerations and could be subject to the lookback period if ownership changes occur shortly before death. Confirming beneficiary consistency and understanding policy terms helps avoid unintended consequences. Additionally, coordinate the transfer with your insurance carrier to ensure the assignment is recorded correctly and premium payment mechanisms are established. This review reduces the risk of administrative problems and helps ensure the ILIT will operate as intended after it is funded.
An ILIT is most effective when coordinated with a complete estate plan including wills, revocable trusts, powers of attorney, and healthcare directives. Ensure that retirement plan beneficiaries, payable-on-death accounts, and other designations align with trust distribution goals to prevent conflicting outcomes. Regularly review the plan, especially after major life events such as marriage, divorce, birth of a child, or significant changes in asset values. Scheduled reviews and updates help keep the ILIT effective and aligned with current intentions and laws.
Families often consider an ILIT to protect life insurance proceeds from estate inclusion, to provide immediate funds for estate settlement, or to implement controlled distribution plans for beneficiaries. An ILIT can be particularly useful for business owners needing liquidity to facilitate succession, parents seeking to provide for minor children, or individuals who want to ensure funds are managed according to long-term objectives. In many cases an ILIT supports seamless coordination with other planning tools and creates a mechanism to preserve wealth across generations while addressing tax and administrative concerns.
Another common reason to use an ILIT is to help preserve public benefits for a beneficiary who may require assistance, by structuring distributions in a way that does not interfere with eligibility. Additionally, an ILIT can create creditor protections and separate the insurance proceeds from personal liabilities. The trust’s terms can specify conditions for distributions, set ages or milestones for disbursement, and direct funds to educational or healthcare needs. Thoughtful drafting of an ILIT provides control and predictability for families planning for future circumstances and unexpected events.
Typical scenarios that lead clients to consider an ILIT include high net worth estates concerned about estate tax exposure, business owners needing liquidity for succession, and families who want to control how life insurance proceeds are distributed across generations. Other circumstances include the desire to protect proceeds from creditor claims, planning for a beneficiary with special needs, or coordinating complex beneficiary situations in blended families. Each scenario requires tailored solutions to align the ILIT’s provisions with the client’s goals and to integrate the trust with the overall estate plan.
When a business owner needs liquidity to facilitate a smooth transition of business interests at death, an ILIT can provide funds to buy out an owner’s share or cover immediate business expenses. The trust can ensure that the proceeds are available to transfer ownership interests without forcing liquidation of business assets. Proper planning addresses valuation, timing, and coordination with buy-sell agreements. This approach simplifies settlement and helps preserve the ongoing viability of the business for employees and remaining owners while providing for family beneficiaries.
An ILIT can protect a beneficiary who relies on public benefits by structuring distributions to avoid disqualifying income or asset thresholds. By placing insurance proceeds in trust with clear instructions, the grantor can provide for medical, educational, and supplemental support while preserving public eligibility. The trust document can include spendthrift provisions and distribution guidelines that prioritize essential needs while preventing misuse. This planning provides peace of mind that funds will be used responsibly and in a manner that complements other planning for the beneficiary’s care and stability.
Blended families and situations with multiple marriages or competing beneficiary interests benefit from an ILIT that clearly defines distribution rules. The trust can allocate proceeds across heirs in a way that reflects the grantor’s intent while minimizing conflict among survivors. Including contingencies and successor beneficiary designations helps address future changes in family structure. The ILIT serves as a reliable vehicle to carry out the grantor’s wishes and reduce the likelihood of disputes, providing structure and transparency for heirs during an emotional and administratively challenging time.
The Law Offices of Robert P. Bergman serves clients in Foresthill and throughout Placer County, offering practical estate planning advice tailored to California law. We assist residents with creating ILITs, coordinating trust administrations, and integrating life insurance planning into broader estate strategies. Whether clients are updating existing documents or creating a new plan, we provide clear guidance on available options, filing considerations, and ongoing administration. Our goal is to make the planning process understandable and manageable, so families can move forward with confidence about their long-term arrangements.
Choosing the right legal partner for ILIT planning means working with a team that listens, explains options in plain language, and ensures documents align with your broader goals. Our firm emphasizes practical solutions that reflect each client’s family situation and financial priorities. We help clients understand the trade-offs, timing considerations, and administrative steps needed to fund and maintain an ILIT. Clear communication and careful drafting reduce the risk of unintended results and simplify the administration process for trustees and families.
We work to translate legal concepts into actionable plans, coordinating with insurance advisors, accountants, and financial professionals when needed to create a cohesive strategy. Our approach includes reviewing existing policies, advising on transfers or new policy purchases, and drafting trust terms that reflect distribution goals. With attention to record-keeping and trustee instructions, we help clients put practical systems in place so the ILIT functions smoothly over time and when matters demand trust administration after the grantor’s passing.
Ongoing support is an important part of our service offering; we encourage periodic plan reviews to address changes in family circumstances, asset values, or tax laws. Clients receive guidance on trustee responsibilities, documentation for premium funding, and steps to preserve intended tax treatments. By maintaining clear records and providing straightforward instructions to trustees and beneficiaries, the likelihood of a smooth transition increases, and families can focus on honoring the grantor’s wishes without unnecessary delay or conflict.
Our process for ILIT planning begins with an initial consultation to understand personal goals, family dynamics, and existing documents. We then review insurance policies and financial information to determine whether transferring an existing policy or creating a new one inside the trust is appropriate. Drafting the ILIT includes clear instructions for trustee powers, distribution mechanisms, and funding strategies. We walk clients through signing, funding, and coordinating with insurance carriers, and provide guidance on required notices, tax considerations, and ongoing administration to keep the trust functioning as intended.
The first step involves a comprehensive review of current estate documents, insurance policies, and financial circumstances to identify objectives and constraints. We discuss whether an ILIT aligns with client goals, evaluate potential tax consequences such as gift tax implications and lookback concerns, and set clear expectations for administration. This step also identifies parties to name in the trust, such as trustees and beneficiaries, and considers coordination with other planning instruments. A thoughtful initial review helps ensure subsequent steps proceed efficiently and with clarity.
We analyze existing life insurance policies for ownership, beneficiary designations, and policy terms to determine the best method to place a policy in trust or to acquire a new trust-owned policy. Our review includes assessing whether a transfer may trigger gift tax reporting, verifying carrier requirements for assignments, and identifying any riders or limitations affecting the policy’s suitability for ILIT ownership. This careful examination reduces the risk of administrative problems and clarifies the actions needed to complete the transaction properly.
We work with clients to prioritize goals such as protecting beneficiaries, minimizing taxes where possible, and ensuring liquidity for estate settlement. This phase includes discussing distribution preferences, special needs considerations, and any desired conditions or milestones for beneficiary access to proceeds. Based on this conversation we propose trust provisions that reflect practical administration and family objectives, making sure the plan aligns with other estate planning documents to avoid conflicting directions and unintended tax or probate outcomes.
Once goals are set, we draft the ILIT document with clear trustee powers, funding provisions, and distribution instructions. We advise on how to transfer an existing policy by assignment or how to have the trust purchase a new policy, and we document premium funding methods to ensure consistent payment. Proper execution, including signatures and carrier acknowledgement, is essential. We also review the timing of transfers to avoid lookback issues and coordinate with advisors to document any gifts or contributions made to the trust for premium payments.
Drafting addresses trustee powers for policy management, record-keeping requirements, and distribution mechanics. We help clients choose trustees who are capable and willing to manage ongoing administration, and we include successor trustee designations to provide continuity. The trust language clearly directs how proceeds should be used, whether to provide income, lump sums, or staged disbursements. Careful drafting anticipates potential disputes and creates procedures for trustee decisions and beneficiary communications to reduce conflict and administrative ambiguity.
Funding includes transferring an existing policy by assignment or arranging for a trust-owned policy to be issued. We coordinate with insurance carriers to document ownership changes and ensure premium payments are properly handled. When contributions are made to the trust for premium payments, proper gift documentation and, if necessary, gift tax filings are prepared. Ensuring carrier forms and trust certifications are properly executed prevents administrative delays and supports the intended estate tax treatment of the policy proceeds.
After the ILIT is funded and functioning, ongoing administration includes timely premium payments, record maintenance, and communication with beneficiaries and trustees. Periodic reviews are important to confirm the trust remains aligned with family goals, insurance policy performance, and changes in law. Trustees should keep detailed records of contributions and disbursements to support tax and accounting requirements. Our firm assists with trustee instructions, trust amendments where legally permissible, and advice about interactions with related estate planning documents to preserve the ILIT’s intended benefits over time.
Trustees must ensure premiums are paid on time and maintain accurate records of funding contributions, beneficiary communications, and policy changes. Proper documentation is especially important when gifts are made to the trust to cover premiums, as this supports tax reporting and demonstrates compliance with trust terms. Trustees should coordinate with financial institutions to streamline payments and retain receipts and trust account statements. This diligence preserves the trust’s integrity and makes administration smoother when the time comes to access proceeds.
Regular reviews help ensure the ILIT continues to meet objectives as family circumstances, policy performance, or tax laws change. We recommend scheduled check-ins to review beneficiary needs, trustee capacity, and whether any adjustments are warranted to other estate planning documents. Coordination with retirement plan beneficiary designations and trust funding methods reduces the risk of inconsistent instructions. Staying proactive helps preserve the intended benefits of the ILIT and provides clarity to trustees and beneficiaries during critical moments.
An ILIT is a trust established to own a life insurance policy and receive the death benefit, held separate from the grantor’s taxable estate when structured and funded correctly. The grantor creates the trust, names a trustee and beneficiaries, and arranges for the trust to own the policy or be assigned an existing policy. Trustee duties include managing the policy, paying premiums from trust funds, and distributing proceeds according to the trust terms. Since the trust is irrevocable, the grantor cannot usually change its terms after transfer, so careful planning is essential. The ILIT’s purpose is often to provide liquidity at death to pay estate taxes or expenses, to manage distributions to heirs, and to keep insurance proceeds from being included in the grantor’s estate for tax purposes. Proper coordination with other estate planning documents, careful timing of transfers, and diligent administration are necessary to achieve these objectives and reduce the risk of unintended tax results or administrative burdens for trustees and beneficiaries.
Transferring a policy into an ILIT can have gift tax implications if ownership changes are considered a taxable gift to the trust’s beneficiaries. Contributions to the trust to pay premiums may also be treated as gifts depending on the circumstances, and appropriate gift tax reporting may be required. However, with careful planning and use of annual gift tax exclusions or other strategies, it is often possible to fund premium payments without creating an unexpected tax burden. It is important to document transfers and contributions fully. Additionally, the three-year lookback rule can cause the policy proceeds to be included in the grantor’s estate if the transfer occurs within a specified period before death. Timing and documentation are therefore critical components of planning to avoid inadvertent estate inclusion. Coordination with financial and tax professionals helps ensure that transfers and funding methods are handled in a way that aligns with the client’s overall objectives.
Under federal rules, a transferred life insurance policy may be included in the grantor’s estate if the transfer occurred within three years of the grantor’s death, commonly referred to as the lookback period. If the transfer was completed more than three years before death, the proceeds are generally excluded from the estate for estate tax purposes, subject to other applicable rules. The three-year rule emphasizes the importance of timing when transferring policies into an ILIT. Because individual circumstances vary and state rules can differ, early planning is advisable. Creating or funding an ILIT well ahead of potential estate events and coordinating with other elements of the estate plan helps maximize the likelihood the trust will achieve the intended estate tax and distribution outcomes. Clients should consult with counsel to consider how timing affects their particular plan.
Choosing a trustee involves considering reliability, administrative ability, and the capacity to act impartially among beneficiaries. Trustees can be family members, trusted friends, or professional fiduciaries; each option carries different implications for cost, skill level, and family dynamics. The trust document should name successor trustees to ensure continuity if the original trustee cannot serve. Clear instructions within the trust reduce the burden on the trustee and provide a roadmap for decision-making and distributions. When selecting a trustee, consider factors such as willingness to serve, organizational skills, proximity for managing interactions, and comfort with coordinating with financial and legal professionals. Many clients prefer naming a trusted individual with a professional backup or co-trustee arrangement to balance personal knowledge of the family with administrative competence. Whatever choice is made, precise drafting of trustee powers and duties is important to support efficient administration.
An ILIT can be structured to benefit a person with special needs by directing distributions in ways that support supplemental care without disqualifying the beneficiary from means-tested public benefits. Drafting the trust with spendthrift protections and specifying the trustee’s authority to make discretionary distributions for housing, education, or medical care can preserve eligibility for programs while providing important financial support. Careful language is essential to avoid unintentionally affecting benefit status. Coordination with special needs planning tools and possibly establishing a separate special needs trust as part of the estate plan may be advisable. Consulting with professionals familiar with public benefits rules helps ensure the ILIT and any related trusts are structured to complement rather than jeopardize the beneficiary’s access to necessary services and supports.
An ILIT is one element of a broader estate plan and should be coordinated with wills, revocable living trusts, powers of attorney, and beneficiary designations on retirement accounts and financial accounts. Consistency among documents prevents conflicting instructions that can complicate administration and produce unintended outcomes. For example, beneficiary designations on life insurance or retirement accounts should align with trust terms to ensure proceeds flow as intended. Regular review of the entire estate plan is important whenever life events occur, such as marriage, divorce, birth, or significant asset changes. Proper integration and consistency among documents help trustees and personal representatives carry out the grantor’s wishes with clarity and efficiency, reducing the potential for disputes or procedural delays at the time of settlement.
If premiums are not paid on time, the life insurance policy could lapse, terminating coverage and negating the purpose of the ILIT. Trustees must monitor payment schedules and maintain adequate trust funding to avoid lapses. The trust document can instruct how premiums are to be paid, and trustees should keep clear records of contributions and payments. Procedures for resolving shortfalls should also be addressed to minimize the risk of policy termination. In the event of administrative lapses, trustees should work promptly with the insurance carrier to explore reinstatement options, which may include paying back premiums or meeting other carrier conditions. Prompt action and good record-keeping increase the likelihood of resolving issues and preserving intended benefits for beneficiaries.
Both options are possible: an existing policy can be transferred into an ILIT by assignment, or the trust can be the owner of a new policy purchased for the grantor. Transferring an existing policy requires carrier approval and proper documentation, and the transfer may have gift tax and lookback implications depending on timing. Creating a new trust-owned policy avoids certain transfer complications but requires underwriting and may involve different premium costs. Each approach has advantages and trade-offs related to taxes, cost, and timing. Reviewing existing policy terms, the grantor’s health status, and funding plans helps determine which route offers the best balance of benefits and administration for the client’s particular situation.
Gifts to an ILIT to pay premiums may be treated as taxable gifts to the trust’s beneficiaries unless structured to fall within the annual gift tax exclusion or otherwise planned. Many ILITs use Crummey withdrawal powers or similar mechanisms to qualify premium contributions for the annual exclusion, allowing donors to make regular contributions without incurring gift tax liability. Proper documentation and timely gift tax filings, where applicable, are important to demonstrate compliance with tax rules. Consulting with a tax professional during setup helps identify the most appropriate funding methods and reporting obligations. Accurate records of contributions, beneficiary notices, and any gift tax returns should be maintained as part of the trust’s administrative file to support tax positions if questions arise.
Estate planning documents, including ILITs, should be reviewed periodically and after significant life events such as marriage, divorce, the birth of a child, major changes in asset values, or changes in tax law. Regular reviews help ensure the trust’s provisions remain relevant and continue to reflect the grantor’s intentions and family circumstances. Trustees should also conduct periodic checks to confirm premium funding remains adequate and carrier communications are up to date. A scheduled review every few years or after material life changes provides an opportunity to confirm trustee readiness, beneficiary needs, and alignment with other planning documents. Proactive maintenance reduces the risk of surprises and helps ensure the ILIT continues to serve its intended role within the overall estate plan.
Criminal Defense
Homicide Defense
Manslaughter
Assault and Battery
Assault with a Deadly Weapon
Battery Causing Great Bodily Injury
Domestic Violence
Domestic Violence Protection Orders
Domestic Violence Restraining Order
Arson Defense
Weapons Charges
Illegal Firearm Possessions
Civil Harassment
Civil Harassment Restraining Orders
School Violence Restraining Orders
Violent Crimes Defense
Estate Planning Practice Areas