An Irrevocable Life Insurance Trust (ILIT) can be a powerful tool for managing life insurance proceeds outside of a taxable estate and preserving wealth for beneficiaries. At the Law Offices of Robert P. Bergman, we help Portola residents understand how an ILIT fits into a broader estate plan, including interactions with revocable living trusts, wills, and powers of attorney. This guide explains what an ILIT is, how it operates, and common reasons clients choose this approach to protect life insurance benefits for family members and other intended recipients while addressing tax and control considerations.
Choosing to create an ILIT requires careful planning and clear documentation to ensure the trust meets legal requirements and accomplishes your goals. Our approach focuses on explaining options, anticipated outcomes, and implementation steps in plain language so you can make informed decisions. We discuss funding the trust, selecting trustees and beneficiaries, and coordinating the ILIT with other estate planning documents such as pour-over wills, trust certifications, and healthcare directives. If you own significant life insurance or want to reduce estate tax exposure, an ILIT can be a strategic component of a durable plan.
An ILIT can help remove life insurance proceeds from your taxable estate, provide liquidity for paying estate obligations, and protect proceeds from creditor claims against beneficiaries. By placing a policy inside an irrevocable trust, you establish clear distribution instructions and can assign trustees to manage proceeds according to your wishes. This structure may also help preserve benefits for younger beneficiaries or individuals with special needs through tailored trust provisions such as special needs trusts or guardianship nominations. For families with retirement plan assets or significant life insurance, an ILIT is a proactive measure to help preserve family wealth and provide for long-term needs.
Law Offices of Robert P. Bergman serves clients across California, including Portola and surrounding communities, providing practical estate planning services tailored to each family’s circumstances. Our practice guides clients through trusts, wills, powers of attorney, healthcare directives, and trust-related petitions such as Heggstad or trust modification petitions. We emphasize clear communication, thoughtful documentation, and coordination among multiple documents like pour-over wills and trust certifications. From initial planning through funding and eventual administration, our goal is to help clients create durable plans that minimize complications and honor their intentions for beneficiaries.
An ILIT is a trust that owns one or more life insurance policies and is designed to keep the death benefit out of the insured’s taxable estate. Because the insured generally cannot retain incidents of ownership, the trust must be structured and funded carefully to comply with tax rules and avoid inclusion in the estate. Trustees hold and manage the policy, receive proceeds at death, and distribute assets according to the trust terms. Proper implementation includes drafting trust terms, transferring existing policies or purchasing new ones within the trust, and scheduling gifts to cover premium payments through annual exclusion or other funding mechanisms.
Setting up an ILIT often involves coordinating with life insurance carriers, financial advisors, and trustees to ensure premium payments are timely and the trust’s terms reflect the client’s wishes. Funding the trust can take multiple forms, including direct transfers of an existing policy or arranging gifts that allow the trustee to pay premiums. It is also important to consider potential gift tax implications when transferring policies and to include clear distribution instructions for beneficiaries, which may include trust provisions for minor children, special needs, or tax planning for estate liquidity.
An ILIT is a legal arrangement in which life insurance policies are placed into a trust that cannot be altered by the grantor once established. The trust owns the policy, the trustee manages premium payments and policy interactions, and the trust document sets terms for distributing proceeds upon the insured’s death. Because the grantor relinquishes ownership and certain rights, the death benefit is generally excluded from the grantor’s estate for tax purposes. An ILIT can include provisions addressing distribution timing, creditor protection, and conditions for beneficiary access to funds, ensuring that benefits are used in ways aligned with the grantor’s intentions.
Key components of an ILIT include the trust document itself, the trustee appointment, beneficiary designations, and insurance policy ownership. Typical processes involve drafting the trust, transferring an existing policy or directing a trustee to purchase a new policy, and establishing a funding mechanism for premiums. Trustees must administer the policy, keep records, and distribute proceeds in accordance with the trust terms. It is also common to coordinate the ILIT with other estate planning documents such as a pour-over will, financial power of attorney, and advance healthcare directive to ensure a cohesive plan across life, incapacity, and death events.
Understanding the terminology around ILITs helps clarify choices and consequences. This glossary explains frequent terms you will encounter when setting up a trust, including ownership transfers, incidents of ownership, grantor and trustee roles, and tax-related concepts. Being familiar with these terms can improve communication with trustees, agents, and financial institutions and reduce surprises when funding the trust or administering policy proceeds. Below are concise definitions for commonly used terms to help guide conversations around trust structure, funding, and administration.
The grantor is the person who creates the trust and transfers assets into it, including life insurance policies. In the context of an ILIT, the grantor typically gives up ownership rights and control over the insurance policy to ensure proceeds are excluded from their taxable estate. While the grantor may establish the trust terms and select trustees and beneficiaries, the trust’s irrevocable nature means the grantor’s ability to change those terms after creation is limited. This deliberate transfer of control is central to how an ILIT achieves its intended tax and creditor protection goals.
The trustee is the person or entity responsible for managing the trust and its assets, including payment of insurance premiums, interaction with the insurance company, and distribution of proceeds according to the trust’s terms. Trustees must follow fiduciary duties to administer the trust in beneficiaries’ best interests and in accordance with the trust document. Choosing a trustee involves balancing reliability, administrative skill, and proximity to beneficiaries, and sometimes a corporate trustee is used when ongoing management and investment administration will be complex.
Incidents of ownership are rights normally held by a policy owner that, if retained by the grantor, can cause the life insurance proceeds to be included in the insured’s taxable estate. Examples include the right to change beneficiaries, surrender the policy, pledge it as collateral, or borrow against it. To achieve removal from the estate, the trust must eliminate these incidents of ownership by ensuring the trustee, not the grantor, holds ownership rights. Careful drafting and implementation are necessary to avoid unintended tax consequences stemming from retained rights.
A Crummey power is a temporary withdrawal right given to trust beneficiaries to allow contributions used to pay policy premiums to qualify for the annual gift tax exclusion. The mechanism provides beneficiaries with a brief period during which they can withdraw the contribution, which tax rules treat as a present interest gift and therefore eligible for exclusion. Using Crummey powers requires formal notice to beneficiaries and appropriate trust wording. Understanding gift tax implications and recordkeeping is important when funding an ILIT through annual contributions or other gifting strategies.
Life insurance can be owned personally or placed in trust, and each approach has trade-offs. Personal ownership maintains more direct control and flexibility but can result in inclusion of proceeds in the insured’s estate, which may create tax exposure or creditor vulnerability. Placing a policy in an ILIT reduces estate inclusion risk and can add structured distributions and creditor protection, but it requires giving up ownership and adhering to trust formalities. Deciding which option is right depends on asset levels, family structure, tax considerations, and long-term goals for the proceeds and beneficiary protections.
If the life insurance policies you own are relatively modest and your overall estate falls comfortably below federal and state estate tax thresholds, keeping policies under personal ownership may offer adequate simplicity. Personal ownership avoids trust setup, reduces administrative burdens, and maintains flexibility for beneficiary changes or policy terminations. Families with straightforward distribution wishes and low potential for creditor claims may find this route appropriate when the costs and complexity of an irrevocable trust outweigh its benefits. A careful review of asset levels and projected liabilities will clarify whether a limited approach is sufficient.
Retaining direct ownership of a policy offers the ability to change beneficiaries, access cash value, or surrender a policy without trustee involvement. For individuals who prioritize ongoing control and potential policy cash value access, personal ownership can be preferable. This route does not provide the same level of estate tax protection or distribution controls as an ILIT, but it preserves options for adjusting coverage in response to life changes. Evaluating whether the need for flexibility outweighs tax and creditor planning goals is an important step in choosing the right arrangement.
When an estate includes retirement accounts, real property, business interests, and significant life insurance, a comprehensive planning approach helps integrate multiple documents and strategies. Coordinating an ILIT with revocable living trusts, pour-over wills, retirement plan trusts, and powers of attorney ensures consistent beneficiary designations, funding mechanics, and administration instructions. This integrated approach reduces the risk of conflicting terms or unintended tax consequences at death or incapacity. For families with layered assets and ongoing responsibilities, comprehensive planning provides a unified framework for transferring wealth according to the owner’s intentions.
Families with beneficiaries who have special needs, minor children, or concerns about creditor claims often benefit from tailored trust provisions that an ILIT can support. Integrating trust tools such as special needs trusts, guardianship nominations, or pet trusts with life insurance planning helps ensure funds are available and used as intended. Comprehensive services also address potential future amendments through trust modification petitions when circumstances change, and the firm can help navigate trusteeship transitions, Heggstad petitions, and other post‑death administrative matters to preserve the plan’s intended outcomes.
A comprehensive approach that includes an ILIT can offer multiple benefits, including estate tax mitigation, liquidity for paying estate expenses, and greater control over the timing and manner of distributions to beneficiaries. Coordinating the ILIT with existing trusts and wills reduces the risk of conflicting beneficiary designations and helps ensure the plan performs as intended upon incapacity or death. By documenting trustee authority, premium funding methods, and distribution standards, the plan helps minimize probate exposure and provides a clearly defined path for trustees to follow, which can reduce family disputes and administrative delays.
Beyond tax and distribution concerns, integrating an ILIT into a broader estate plan can be useful for protecting proceeds from creditor claims and tailoring support for beneficiaries with unique needs. The ILIT can work in concert with special purpose trusts such as special needs trusts, retirement plan trusts, and provisions for guardianship nominations. This layered approach supports both immediate liquidity needs and long-term stewardship of assets, allowing families to provide ongoing care and financial stability for heirs while preserving the grantor’s legacy and intentions.
One of the principal benefits of placing life insurance in an ILIT is reducing the likelihood that the death benefit will be included in the insured’s estate for tax purposes, which may preserve value for heirs. Additionally, because the trust owns the policy, proceeds can be shielded from beneficiaries’ personal creditors when properly drafted. These protections can be important for families with business obligations, professional liability exposure, or the desire to ensure that proceeds are used as intended rather than being subject to creditors’ claims or mismanagement by heirs.
An ILIT allows grantors to specify distribution conditions, timing, and trustee powers, helping manage how life insurance proceeds support beneficiaries over time. This structure is valuable for providing staged distributions to younger heirs, creating trust-funded education or health support, or preserving assets for future generations. By appointing a capable trustee and defining clear instructions, families can promote financial stability and guard against impulsive spending, while providing flexibility for trusted fiduciaries to respond to changing needs and circumstances in ways consistent with the grantor’s goals.
Begin ILIT planning well before policy maturity or anticipated life changes so transfers and funding strategies can be implemented without rushed decisions. Early planning allows time to coordinate beneficiary designations, pour-over wills, and power of attorney documents, and to ensure that premium funding mechanisms such as annual gifts or payroll allocations are in place. Advance coordination reduces the risk of accidental retention of ownership rights and makes it easier to document Crummey notices and other formalities. Thoughtful timing also helps avoid inclusion in the insured’s estate due to recent transfers of ownership.
Maintain accurate records of policy ownership transfers, premium payments, beneficiary notices, and any Crummey withdrawal opportunities. Trustees should issue required notices to beneficiaries when contributions are made that qualify for gift tax exclusions and keep detailed documentation to support tax filings and administrative actions. Clear communication with beneficiaries about the trust’s purpose and distribution terms can reduce misunderstandings and disputes later. Organized records also simplify administration at the insured’s death and help trustees meet fiduciary duties without delay.
Residents consider establishing an ILIT to help remove life insurance proceeds from their taxable estate, provide liquidity to cover estate taxes and debts, and create controlled distributions for heirs. An ILIT is useful for families who want to preserve assets for future generations, provide for minor children or beneficiaries with special needs, or ensure that life insurance benefits are managed according to specific instructions. It also offers a mechanism to protect death benefits from creditors and avoid unintended consequences of direct beneficiary ownership.
Beyond tax and creditor considerations, an ILIT helps align life insurance proceeds with broader planning goals, such as funding a retirement plan trust, designating a pour-over will, or supporting guardianship nominations. Families with business interests, multiple properties, or complex beneficiary situations often use ILITs as part of an integrated estate plan. The structure can reduce probate administration and provide continuity of financial support, making it easier for trustees to meet obligations and distribute funds in ways that reflect the grantor’s long-term intentions.
Typical circumstances prompting ILIT creation include ownership of large life insurance policies, concerns about estate tax exposure, the desire to control distribution timing for beneficiaries, and the aim to protect proceeds from creditors. Families anticipating significant liquidity needs at death, those with minor children or dependent adults, and owners of closely held businesses may find an ILIT helpful. Additionally, individuals planning multi-generational wealth transfers or coordinating retirement plan trusts with life insurance proceeds often implement ILITs to align resources with long-range goals and reduce administrative friction at the time of distribution.
Owners of sizable life insurance policies often seek ILITs to keep death benefits out of the taxable estate and preserve proceeds for heirs. When policy values are significant in relation to the rest of the estate, placing ownership in a trust can reduce potential estate tax exposure and provide structured distribution. This is particularly relevant for clients with real property, business interests, or large retirement accounts who want to ensure liquidity for estate obligations and protect the intended beneficiaries from disproportionate tax impact or delayed distributions.
When one or more beneficiaries have special financial, medical, or developmental needs, an ILIT can be drafted to coordinate with special needs trust provisions, ensuring proceeds are used to supplement care without jeopardizing public benefits. The trust language can limit direct access to funds while providing a trustee the ability to make distributions for health, education, maintenance, or support. This structure helps secure long-term care and resource management for vulnerable beneficiaries while preserving their access to necessary public programs.
Families seeking to minimize probate involvement and maintain privacy around the distribution of life insurance proceeds often choose an ILIT. Because the trust owns the policy and distributes assets according to its terms, proceeds typically pass outside of probate court, enabling a faster, more private transition of benefits to named beneficiaries. This can reduce public administration of the estate, limit court oversight, and provide a more discrete and orderly method for transferring funds at the time of the insured’s death.
The Law Offices of Robert P. Bergman serves Portola and the broader Plumas County area with estate planning services tailored to local residents’ needs. We assist with ILIT formation, trust coordination, wills, powers of attorney, healthcare directives, and guardianship nominations, offering clear guidance on funding and administration. Our approach is practical and focused on achieving durable outcomes that reflect client priorities. If you want to discuss whether an ILIT fits your circumstances or how to coordinate insurance policies with a revocable living trust or pour-over will, reach out to schedule a consultation.
Our firm concentrates on helping individuals and families create cohesive estate plans that integrate life insurance, trusts, and related documents. We emphasize personalized planning and clear implementation steps so clients understand how an ILIT functions with other estate instruments. From selecting trustees and drafting precise distribution terms to coordinating insurance transfers and funding strategies, we guide clients through the details necessary to implement an effective plan that matches their goals.
We handle practical matters such as preparing Crummey notices, documenting ownership transfers, and coordinating with insurance carriers to ensure policies owned by the trust are properly administered. Our process includes careful review of beneficiary designations, retirement plan coordination, and drafting of supporting documents such as pour-over wills and certifications of trust. We aim to reduce administrative burdens for families and provide documentation that trustees and financial institutions can easily follow.
Clients benefit from a consistent, client-focused approach that considers long-term administration and potential future adjustments. We assist with trust modification petitions, Heggstad petitions when funding issues arise, and guidance on guardianship nominations and special needs trusts to address family-specific concerns. If you need help implementing or maintaining an ILIT as part of a larger estate plan, we can provide practical solutions to protect your intentions and support your beneficiaries.
Our process for establishing an ILIT begins with an initial consultation to understand your objectives, policy ownership, and family dynamics. We review existing documents like revocable living trusts, wills, beneficiary designations, and financial accounts. After identifying goals and constraints, we draft the ILIT document, coordinate the transfer or purchase of policies, set up premium funding mechanisms, and prepare any required notices. We also outline trustee duties and provide guidance for recordkeeping and administration so the trust functions smoothly during the insured’s lifetime and at the time of death.
During the first phase, we meet to discuss goals, review policies and existing estate documents, and evaluate whether an ILIT is appropriate. This includes identifying life insurance holdings, retirement accounts, and other assets that affect estate planning decisions. We consider beneficiary needs, potential tax exposure, and creditor concerns to craft a plan aligned with your objectives. The discovery helps determine whether a transfer of ownership or a new policy purchased by the trust will best meet your objectives and what funding approach will be needed for premium payments.
We request copies of life insurance policies, trust documents, wills, account statements, and any existing powers of attorney or healthcare directives to build a complete picture. Accurate documentation is essential for identifying ownership issues, beneficiary designations, and potential conflicts among documents. Gathering this information early enables clear recommendations about funding, trustee selection, and coordination with other elements of the estate plan to ensure consistent directions across all instruments.
Once we understand the policy structure and your goals, we analyze premium payment needs, possible use of annual gift exclusions, and whether Crummey powers are required to qualify contributions as present interest gifts. We evaluate potential gift tax implications and suggest practical funding mechanisms to support trustee premium payments while complying with applicable rules. This planning ensures the ILIT can remain funded over time and reduces the risk of unintended tax consequences from improper transfers or retained control.
In the next stage, we prepare the trust document with clear trustee powers, beneficiary distribution terms, and provisions for Crummey notices if applicable. We coordinate transfer of existing policies or arrange for the trustee to acquire new coverage, ensuring that ownership designations and policy assignments are properly executed. Proper funding steps and notice procedures are implemented to qualify gifts for tax exclusions and to establish the trust as the policy owner, which is essential to the trust’s intended tax and asset protection functions.
We assist with executing the trust document and completing necessary forms with the insurance carrier to transfer ownership or assign beneficiary rights to the trust. This includes coordinating signatures, updating policy records, and obtaining carrier confirmations. Clear documentation of the transfer date and the trust’s tax identification details helps avoid later disputes about ownership or estate inclusion. We also draft any ancillary documents needed to support the transfer and to instruct trustees regarding premium handling and policy administration.
We set up the method for funding premium payments, whether through annual gifts from the grantor, trust-held assets, or other arrangements, and prepare beneficiary notices where Crummey powers are used. Proper notice and recordkeeping are critical to support the tax treatment of gifts and to document the trust’s operation. Trustees are provided with templates and instructions for issuing notices and maintaining records so that future administration and tax reporting are straightforward and defensible.
After the trust is established and funded, trustees handle premium payments, maintain records, and manage communications with beneficiaries and insurance carriers. At the insured’s death, trustees must file claims, receive proceeds, and distribute assets according to trust terms. We provide support for trustees during administration, including preparing necessary trust certifications, coordinating with executors for pour-over wills, and handling petitions such as Heggstad or trust modifications when funding discrepancies arise. Continued oversight helps ensure the trust accomplishes the grantor’s goals.
We advise trustees on filing claims with insurance carriers, producing required documentation, and managing distribution of proceeds consistent with the trust document. Trustees often need assistance navigating carrier processes, beneficiary queries, and coordination with estate administrators or executors. Our guidance helps trustees meet fiduciary responsibilities and reduces the likelihood of administrative errors that could delay distributions or create disputes among beneficiaries, ensuring timely and orderly trust administration.
Following receipt of insurance proceeds, trustees may need assistance with tax reporting, coordinating distributions with other estate assets, and addressing any funding shortfalls through Heggstad or trust modification petitions. We guide trustees through required filings and help resolve funding or ownership irregularities discovered after death. Practical post-death support ensures distributions align with the grantor’s intent while addressing administrative requirements, creditor claims, and any court petitions necessary to effectuate trust terms or correct prior funding issues.
An Irrevocable Life Insurance Trust is a trust designed to own life insurance policies so that proceeds are managed and distributed outside of the insured’s taxable estate. The trust document names a trustee to hold and administer the policy, receive proceeds at death, and distribute funds according to the instructions set forth by the grantor. Because the trust owns the policy and the grantor relinquishes certain ownership rights, the death benefit is typically not included in the grantor’s estate for tax purposes. Setting up an ILIT involves drafting the trust terms, transferring ownership or arranging purchase of a policy by the trustee, and establishing funding mechanisms for premiums. Proper implementation requires attention to gifting rules, notice requirements, and policy carrier procedures to ensure the trust operates as intended and achieves the desired tax and distribution outcomes.
Placing a life insurance policy in an ILIT can prevent the death benefit from being included in the insured’s estate if the transfer is completed properly and the grantor does not retain disqualifying incidents of ownership. Timing matters: transfers made soon before death can still be included in the estate under certain rules, so early planning is advisable. Clear separation of ownership and careful documentation are essential to support the intended tax treatment. It is also important to coordinate beneficiary designations and to avoid retaining control or rights that would cause estate inclusion. Working with counsel to draft the trust and execute transfers properly reduces the risk of unintended tax exposure and helps ensure proceeds pass under trust terms rather than through probate or estate inclusion.
Premiums for policies owned by an ILIT are commonly funded through annual gifts from the grantor to the trust, which the trustee then uses to pay premiums. These gifts are often structured to qualify for the annual gift tax exclusion by using Crummey withdrawal powers that give beneficiaries a limited right to withdraw contributions, thereby creating a present interest gift. Proper notice to beneficiaries and accurate recordkeeping are required for this approach to qualify for exclusions. Other funding approaches include seeding the trust with assets sufficient to cover premiums or funding through non-gift sources when appropriate. The chosen method should account for the family’s cash flow, tax implications, and the trustee’s responsibility to maintain premium payments, ensuring the policy remains in force to provide the intended benefit at death.
Transferring an existing policy into an ILIT is possible, but it must be done with care to avoid unwanted tax consequences. The transfer should be documented with the carrier, and ownership must be assigned to the trust. If the transfer involves a recent change in ownership, there may be estate inclusion risks for transfers made within a short period before the insured’s death, so timing and documentation are key to accomplishing the intended outcome. When transferring a policy, it is also necessary to address premium funding and confirm that the trust can legally hold and administer the policy. Coordination with the insurance company to confirm assignment, beneficiary status, and any carrier requirements is an essential part of the transfer process to ensure a smooth transition and valid trust ownership.
A trustee should be someone you trust to manage the policy and follow the trust document’s directions, such as a family member, friend, or a professional fiduciary. The trustee’s role includes handling premium payments, filing claims, maintaining records, and making distributions as specified. When choosing a trustee, consider reliability, willingness to serve, and administrative capability, since the position carries ongoing responsibilities and potential interactions with insurers and beneficiaries. Many clients name successor trustees to provide continuity if the primary trustee cannot serve. In some cases, a corporate trustee or trust administrative service may be appropriate when professional management is desired or when ongoing investment and distribution issues will be complex and require continuous oversight.
An ILIT should be integrated with a revocable living trust, pour-over will, powers of attorney, and healthcare directives to ensure consistent instructions and beneficiary designations across all estate planning documents. Coordination prevents conflicts, such as inconsistent beneficiary naming or duplicate distributions. It also ensures that the ILIT functions as intended alongside other trusts and wills that manage different estate assets and succession matters. Proper integration includes reviewing retirement plan beneficiary designations, ensuring pour-over wills address trust funding gaps, and confirming that powers of attorney and healthcare directives reflect your overall plan. This coordination helps avoid unintended gaps in funding and simplifies administration at the time of incapacity or death.
Crummey powers are temporary withdrawal rights provided to beneficiaries that allow contributions to the trust to qualify for the annual gift tax exclusion by creating a present interest. When beneficiaries are given a short window to exercise this right, tax rules treat the gift as eligible for the exclusion. Trustees typically provide written notice of the withdrawal right and maintain records showing that notices were issued to support the tax treatment. Using Crummey powers requires careful drafting and consistent notice procedures to ensure gifts qualify for the exclusion. Failure to provide proper notice or maintain records can jeopardize the gift tax treatment, making accurate administration an important aspect of ILIT maintenance and compliance.
If a policy is not properly transferred or funded, several issues can arise, including the possibility that the death benefit becomes part of the insured’s estate or the policy lapses for nonpayment of premiums. Improper transfers may also create administrative hurdles for trustees and beneficiaries, and funding gaps can lead to unintended tax consequences or loss of coverage. Early and careful implementation reduces these risks and helps preserve the trust’s intended benefits. When problems surface after a policy owner’s death, corrective measures such as Heggstad petitions or trust modification procedures may be available to address funding errors or transfer irregularities. Legal guidance can help trustees and families assess options to remedy defects and pursue the best solutions to protect beneficiary interests and trust objectives.
After the insured’s death, the trustee files a claim with the insurance company and collects the death benefit on behalf of the trust. The trustee then administers distributions in accordance with the trust document, which may provide for immediate lump-sum payments, staged distributions over time, or discretionary distributions for health, education, maintenance, and support. Clear trust terms and diligent trustee recordkeeping facilitate timely claims processing and distribution of proceeds as intended. Trustees should also coordinate distributions with other estate assets and handle any required tax reporting. When questions or disputes arise, legal counsel can assist trustees in interpreting trust provisions and resolving beneficiary concerns to achieve distributions consistent with the grantor’s objectives and the trust’s terms.
Having a revocable living trust is an important part of many estate plans, but it does not always address the specific tax and creditor protections that an ILIT can provide for life insurance proceeds. A revocable trust is amendable and may not keep life insurance proceeds out of the taxable estate if the insured retains incidents of ownership. An ILIT, being irrevocable, is designed specifically to own policies in a way that supports estate tax planning and tailored distribution controls. Whether you need both depends on your asset profile, beneficiary needs, and goals for the proceeds. Many clients use a revocable living trust for general estate administration and an ILIT specifically to hold life insurance, coordinating the two through pour-over wills and beneficiary designations to achieve a comprehensive plan.
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