An Irrevocable Life Insurance Trust (ILIT) can be a powerful tool for managing life insurance proceeds, reducing potential estate tax exposure, and ensuring clear distribution to heirs. For families in Lake Arrowhead and San Bernardino County, understanding how an ILIT fits within a broader estate plan is essential to preserving wealth for future generations. This page explains why an ILIT may be appropriate, how it interacts with other estate planning documents like revocable living trusts and pour-over wills, and practical steps to create and fund the trust while meeting California legal requirements and the unique needs of your family.
Choosing the right approach to life insurance and trust planning involves attention to formalities and awareness of timing, ownership, and beneficiary designation rules. An ILIT requires transferring policy ownership into the trust and maintaining formal trustee administration that aligns with your intent. Proper drafting prevents unintended estate inclusion and supports efficient distribution at the time of claim. This guide outlines common documents you may combine with an ILIT, including financial powers of attorney and advance health care directives, and describes how petitions such as Heggstad or trust modification petitions may arise during administration or after changes to asset ownership.
An ILIT serves multiple functions beyond simply holding a life insurance policy. It can remove policy proceeds from your taxable estate when properly funded, provide liquidity to pay estate expenses without forcing asset sales, and create a controlled distribution mechanism tailored to your family’s needs. For those with blended families, beneficiaries with special needs, or significant estate values, an ILIT can define how proceeds are used and who manages distributions. Carefully drafted trust terms and trustee selection help preserve wealth while aligning with long-term family objectives, making an ILIT an important consideration in a comprehensive estate plan for residents of Lake Arrowhead and nearby communities.
Law Offices of Robert P. Bergman assists individuals and families throughout San Jose and San Bernardino County with tailored estate planning services that include trust drafting, trust administration, and related court petitions. Our approach emphasizes careful document drafting, clear communication, and practical steps to implement plans that reflect client goals. We work with clients to coordinate life insurance ownership, beneficiary designations, and trust funding so that each plan functions smoothly. Local knowledge of California probate and trust laws helps ensure that documents are aligned with legal requirements and community expectations, offering clients practical guidance and responsive service at every stage.
An ILIT is a trust that owns one or more life insurance policies on the life of the grantor. Because the trust itself holds the policy, proceeds at death pass to the trust beneficiaries according to trust terms instead of being paid to the estate. Funding, trustee powers, and distribution instructions are defined in the trust document and must be implemented with formal transfers of policy ownership and premium payment arrangements. Understanding the interplay of ownership, gift tax considerations, and the three-year lookback rule for transfers is important when deciding whether an ILIT is the right vehicle for your objectives in California.
Implementing an ILIT involves practical steps that determine whether the policy escapes inclusion in the grantor’s gross estate. That process typically includes retitling an existing policy in the trust name or purchasing a new policy owned by the trust, documenting premium gifts to trustees when appropriate, and maintaining trustee records. Trustees manage trust assets and handle beneficiary distributions according to clear trust instructions. Because each family’s situation differs, careful review of existing estate planning documents, retirement designations, and insurance ownership is necessary to coordinate an ILIT with a broader plan that meets long-term family goals and minimizes unintended tax or probate consequences.
An ILIT is a trust into which a life insurance policy is placed so that the policy proceeds are owned by and paid to the trust at the insured’s death. The trust document names beneficiaries who will receive distributions under the trustee’s discretion or according to set terms. Because the grantor no longer owns the policy, proceeds generally are excluded from the grantor’s estate for tax and probate purposes when the trust is properly structured and funded. The trust can include provisions for how proceeds are invested, distributed, and used for specific purposes like supporting minor children, paying estate expenses, or providing for a surviving spouse while protecting assets for future beneficiaries.
Core elements of a successful ILIT include clear trust drafting, naming a trustworthy trustee, proper transfer of policy ownership, and coordinated premium payment arrangements. Trustees should maintain detailed records of premium gifts, trust receipts, and distributions. The drafting must address trustee powers, beneficiary classes, distribution conditions, and fallback provisions if a beneficiary predeceases the insured. Practical administration may require filing a certification of trust for banks or insurers, and, where ownership changes occurred incorrectly, petitions such as a Heggstad Petition or trust modification petition can correct title and beneficiary issues. Attention to these elements helps preserve intended benefits and avoids disputes during administration.
This glossary covers common terms you will encounter when considering an ILIT, including policy ownership, grantor, trustee, beneficiary, funding, and the three-year rule. Understanding these terms clarifies the roles and responsibilities within an ILIT and helps you discuss options with your attorney and financial representatives. Definitions below are written to be practical and usable when reviewing documents or communicating with trustees and insurers. A clear grasp of terminology reduces the risk of misunderstandings and supports smoother trust funding and administration in accordance with California law and your personal objectives.
The grantor, or trustmaker, is the person who creates and funds the ILIT. By transferring ownership of a life insurance policy into the trust, the grantor gives up legal title to the policy, which is essential to keep proceeds out of the grantor’s estate for tax purposes. The grantor typically selects the trustee and decides who the beneficiaries will be and how proceeds should be used. While the grantor retains the right to set terms and expectations, once the policy is transferred the grantor cannot unilaterally reclaim ownership, so careful planning and consideration of long-term goals are required before creating an ILIT.
The trustee manages the trust assets, including the life insurance policy and any distributions from policy proceeds after the insured’s death. Trustee duties often include maintaining records, paying premiums using trust funds or contributions, filing necessary tax forms, and following distribution instructions in the trust document. The trustee must act in the best interests of beneficiaries according to the trust’s terms and applicable law. Selecting a trustee who is capable of administrative tasks and fiduciary decision-making is critical so the trust operates as intended and beneficiaries receive timely and appropriate distributions.
The three-year inclusion rule refers to a tax provision that can cause life insurance proceeds to be included in a grantor’s estate if the grantor transferred a life insurance policy to another person or trust within three years of death. To avoid estate inclusion under this rule, many clients transfer ownership well before the three-year window or purchase a new policy owned by the ILIT. Timing and proper documentation matter to prevent unintended estate tax consequences, so careful planning and early implementation are recommended when an ILIT is part of your estate strategy in California.
Funding an ILIT typically involves transferring an existing policy into the trust or having the trust purchase a new policy and arranging trust contributions to cover premiums. Often, grantors make annual gifts to beneficiaries or directly to the trustee to cover premium payments and to maintain the trust’s non-inclusion status. Gift tax considerations and appropriate documentation, such as trust certificates for insurance companies and annual gift records, help maintain compliance. Trustees should keep transparent records of premium gifts and payments to demonstrate proper administration and preserve the intended estate planning benefits of the ILIT.
When evaluating an ILIT, it is helpful to compare it with alternatives like holding life insurance in a revocable living trust, leaving it to beneficiaries directly, or using life insurance to equalize inheritances. An ILIT provides separation between the insured and the policy ownership, which can protect proceeds from estate inclusion and certain creditor claims. Revocable trusts offer flexibility but do not remove assets from the taxable estate while the grantor is alive. Direct beneficiary designations are simple but offer less control over how proceeds are used. Comparing these options against family goals helps determine the most suitable arrangement.
A limited approach may be appropriate when the anticipated estate tax exposure is low and family needs are straightforward. If you have modest assets and intend that life insurance proceeds be used immediately by a surviving spouse or close family member without complex conditions, keeping ownership simple and using direct beneficiary designations can be practical. This approach reduces administrative overhead and ongoing trust management responsibilities. However, even when choosing simplicity, it is wise to document your wishes clearly and coordinate beneficiary designations with other estate planning documents to avoid conflicts or unintentional disinheritance.
If your circumstances indicate little concern for creditor claims, contested distributions, or beneficiary incapacity, a limited approach may suffice. Families with trusting beneficiaries who will manage proceeds responsibly and who do not require controlled payouts can find direct designations or a revocable trust adequate. This path avoids the formality of transferring policy ownership to a trust and the need for annual premium gift documentation. Still, it is important to regularly review beneficiary designations and retirement account forms to ensure they align with your overall estate plan and current family dynamics.
Comprehensive planning becomes important for blended families, beneficiaries with special needs, or when potential estate tax exposure is significant. An ILIT coordinated with a revocable living trust and other documents can protect inheritances, preserve governmental benefits for disabled beneficiaries, and provide clear trustee instructions to manage proceeds responsibly. Detailed planning also addresses liquidity needs for estate administration and can structure distributions to avoid unintended consequences. A thoughtful, coordinated approach ensures life insurance works together with the rest of your estate plan to meet both immediate and long-term family financial needs.
Comprehensive service helps prevent common pitfalls such as incorrect ownership transfers, mismatched beneficiary designations, and failure to document premium gifts. These mistakes can lead to estate inclusion, creditor exposure, or disputes among heirs. Working through a comprehensive process addresses trustee selection, successor trustee provisions, and necessary court petitions to correct title or amend terms when circumstances change. Proper planning and clear documentation reduce the risk of litigation and administrative delays, giving families greater certainty about how life insurance proceeds will be handled when they are most needed.
A comprehensive approach that includes an ILIT can safeguard proceeds from inclusion in the grantor’s estate, provide liquidity to settle taxes and expenses, and deliver controlled distributions that reflect your intentions. Combining an ILIT with other documents like a pour-over will, revocable living trust, and powers of attorney creates an integrated plan that addresses incapacity, asset management, and transfer at death. Clear coordination reduces the likelihood of unintended beneficiaries receiving proceeds or of family disputes, while also ensuring that funds are available to cover immediate costs such as funeral expenses, debts, and taxes without forcing the sale of illiquid assets.
Additionally, a coordinated plan allows for tailored solutions like irrevocable life insurance trusts that protect benefits for children, grandchildren, or beneficiaries with special needs while preserving eligibility for public benefits when appropriate. Planning can also include provisions such as pet trusts or guardianship nominations for minors to ensure continuity of care. Thoughtful coordination streamlines administration, supports long-term wealth preservation, and provides clear instructions that help trustees carry out your wishes faithfully and efficiently for the family members you wish to protect.
One of the primary advantages of an ILIT in a comprehensive plan is managing estate tax exposure while creating liquidity for settlement costs. When premiums and ownership are properly structured, the proceeds paid to an ILIT are generally excluded from the grantor’s estate, helping preserve the net value passed to heirs. The trust can be instructed to use proceeds to pay taxes, debts, and administrative costs, preventing the need to liquidate other assets. This planning approach supports a smoother administration process and helps maintain the integrity of long-term asset preservation strategies for the family.
An ILIT enables you to set specific terms for how proceeds are distributed, providing protection where beneficiaries are minors, have special needs, or face potential creditor risks. Trust provisions can stagger distributions, require trustees to manage funds prudently, and establish conditions for access to principal or income. This level of control ensures proceeds are used for intended purposes like education, health care, or long-term support rather than being immediately consumed. Carefully drafted distribution provisions can preserve family wealth across generations while addressing practical concerns about beneficiary decision-making and financial stability.
Begin discussions about an ILIT well before you anticipate needing it to allow time for proper policy transfers and to avoid the three-year inclusion window that can complicate tax treatment. Early coordination with your insurer, trustee, and financial advisors ensures ownership is retitled correctly and that premium payment arrangements are in place. Documenting gifts used to pay premiums and maintaining consistent records will help demonstrate that transactions were completed properly. Starting early reduces the chance of errors, eases administration, and gives you flexibility to design trust terms that reflect your family’s long-term objectives.
Regularly review beneficiary designations on life insurance, retirement accounts, and other instruments to confirm they align with your trust documents and overall estate plan. Changes in family circumstances, such as marriage, divorce, births, or deaths, may require updates to ensure assets flow according to your wishes. Conflicts between beneficiary designations and trust provisions can create delays, disputes, or unintended outcomes. Schedule periodic reviews and communicate changes to trustees and advisors so records remain consistent and administration proceeds smoothly when the policy pays out.
Consider an ILIT if you want life insurance proceeds to be managed and distributed under trust terms rather than flowing directly to a beneficiary or through probate. An ILIT is appropriate when protecting proceeds from potential estate inclusion, providing for minor children, preserving benefits for a beneficiary with disabilities, or ensuring liquidity for estate settlement are priorities. It can also be useful for families who want to control distribution timing or appoint a trustee to manage funds responsibly. Careful planning ensures the ILIT complements other documents such as wills, living trusts, and healthcare directives for well-rounded estate coverage.
You may also consider an ILIT if you have sizable life insurance policies and want to preserve their value across generations without subjecting proceeds to probate or estate taxes. An ILIT can provide a mechanism for leaving lasting support and financial protection for descendants. It also helps avoid complications when estate assets are illiquid, allowing insurance proceeds to cover taxes, debts, and administration costs. If your situation involves multiple properties, retirement accounts, or complex family dynamics, an ILIT incorporated into a comprehensive plan can offer clarity and stability for the long term.
Common circumstances that lead families to use an ILIT include blended family arrangements where control over distribution is needed, beneficiaries with special needs who may rely on government benefits, and estates where liquidity for taxes or debts is anticipated. Business owners may also use an ILIT to provide continuity for family-run enterprises or to equalize inheritances among heirs. In each case, creating an ILIT helps clarify how proceeds will be used and who will manage funds, reducing family conflict and supporting orderly administration under the trustee’s direction according to the grantor’s goals.
When children are minors, an ILIT allows you to direct how life insurance proceeds are used and when distributions occur. The trust can appoint a trustee to manage funds for education, health care, and living expenses until children reach ages you specify. This structured approach prevents premature access to large sums by young beneficiaries and ensures professional management when needed. Including guardian nominations in your broader plan complements the ILIT by providing a clear plan for both financial and personal care of minors, offering peace of mind for parents and caregivers alike.
An ILIT can be tailored to protect eligibility for public benefits while providing supplemental support for beneficiaries with disabilities. Carefully drafted trust provisions avoid direct distributions that would jeopardize means-tested benefits and instead structure payments to cover housing, medical, or therapy expenses without disqualifying the beneficiary. Coordination with special needs planning is essential to preserve access to government programs while delivering additional resources. This approach balances compassion and financial security, ensuring proceeds enhance quality of life without unintentionally affecting benefit eligibility.
When an estate includes significant illiquid assets like real estate or a family business, an ILIT can supply cash to pay taxes, debts, and administration costs without forcing sales at inopportune times. Trust proceeds allow executors or trustees to meet immediate expenses and preserve long-term value by avoiding rushed asset liquidation. Additionally, an ILIT can be part of broader tax planning to keep certain assets outside the taxable estate when structured and timed properly. This planning protects family wealth and supports a smoother transition of assets to beneficiaries.
Law Offices of Robert P. Bergman provides estate planning services to residents of Lake Arrowhead and surrounding areas, focusing on practical solutions for trust formation, life insurance planning, and administration. We assist clients in drafting revocable and irrevocable trusts, preparing wills and pour-over wills, and creating necessary powers of attorney and healthcare directives. Our work also covers trust certifications, Heggstad petitions, and trust modification petitions when circumstances change. Local knowledge of San Bernardino County probate and trust procedures enables us to guide families through both planning and administration with clear communication and attention to detail.
Our firm focuses on practical, client-centered estate planning that aligns life insurance strategies with broader goals such as asset protection, beneficiary support, and estate liquidity. We help clients navigate transfer formalities, coordinate with insurers, and draft trust terms that reflect their intentions while complying with California law. Clear drafting and careful funding reduce the risk of unintended inclusion in the estate and simplify administration when the policy pays out. We emphasize communication and documentation so families understand each step and feel confident their plans will function as intended.
We assist with a full range of supporting documents, including revocable living trusts, pour-over wills, financial powers of attorney, advance health care directives, and guardianship nominations. When issues arise, we advise on remedies such as Heggstad petitions or trust modification petitions to correct titles or update provisions. Our approach is to provide practical legal guidance, coordinate with financial professionals, and help trustees carry out duties efficiently, all while keeping clients informed so they can make sound decisions for their families’ futures.
Clients choose our firm for thoughtful planning that balances control, flexibility, and long-term protection. We prepare documents that anticipate common administration issues and include clear instructions for trustees to follow, reducing the likelihood of disputes and delays. Whether you are creating a new ILIT, transferring an existing policy, or coordinating life insurance with a comprehensive estate plan, we provide hands-on assistance to ensure each step is completed correctly and records are maintained for future review and administration.
Our process begins with a thorough review of your current estate plan, insurance ownership, and family objectives to determine whether an ILIT fits your needs. We then draft trust documents tailored to your goals, assist in transferring policy ownership or acquiring new policies owned by the trust, and prepare the documentation trustees and insurers need. We coordinate premium funding, provide trustee guidance, and file or prepare any necessary petitions to resolve title or beneficiary issues. Throughout, we emphasize clear records and communication so the ILIT functions smoothly for beneficiaries when it is needed most.
The initial stage involves reviewing existing estate planning documents, insurance policies, and beneficiary designations to identify gaps and opportunities. We meet to discuss family goals, potential tax exposure, and concerns such as creditor protection or special needs considerations. Based on that review, we recommend whether an ILIT is appropriate and how it should be structured alongside revocable trusts, wills, and powers of attorney. This step ensures that the recommended plan addresses your priorities and aligns with California law and practical administration considerations for trustees and beneficiaries.
We carefully examine all relevant documents, including life insurance policies, trust instruments, wills, and account beneficiary forms, to detect inconsistencies or required updates. This coordination reduces the risk of conflicting beneficiary designations or assets that fail to transfer as intended. Reviewing records early allows us to prepare any necessary trust certifications and to advise on whether policy retitling or new policy purchase is required. Clear documentation at this stage streamlines funding and administration and helps prevent disputes down the road.
We discuss your family dynamics, distribution preferences, and the type of trustee best suited to manage the ILIT. Selecting a trustee who can fulfill administrative duties and follow trust terms is a key decision that affects how proceeds will be managed for beneficiaries. We evaluate potential trustees, suggest fallback provisions, and draft trustee powers and limitations to match your objectives. This thoughtful selection supports long-term trust administration and helps ensure proceeds are used in ways that reflect your intentions and benefit your loved ones.
After agreeing on the plan structure, we draft the ILIT document and related instruments to clearly state trustee powers, distribution conditions, and funding mechanisms. We work with insurers to retitle existing policies or to facilitate a new policy owned by the trust and prepare trust certifications needed by financial institutions. We also advise on gift documentation for premium payments and help trustees set up accounting procedures. This stage ensures that all formalities are completed so the ILIT achieves its intended estate planning benefits while maintaining compliance with applicable rules.
Trust drafting focuses on clear language governing distributions, trustee powers, successor trustee appointments, and contingencies for changed circumstances. We assist with the paperwork to transfer ownership of existing policies into the trust or to place a new policy in trust. The transfer process includes notifying insurers, completing assignment and ownership forms, and ensuring the trust meets insurer requirements. Proper paperwork and timely coordination are essential to prevent unintended estate inclusion and to ensure the trust will receive proceeds as intended when the claim is made.
Premium payments must be handled carefully to preserve the ILIT’s intended tax treatment. We advise on mechanisms for funding premium payments, including annual gifts to the trust or direct premium contributions, and prepare written records to document those transactions. Trustees should maintain logs of gifts and payments, and any required gift tax filings should be considered as part of the plan. Clear documentation at this stage demonstrates compliance with rules and supports the trust’s position if questions arise later about the timing or source of premiums.
Once the policy is in place and the trust is funded, administration includes maintaining records, communicating with beneficiaries, and preparing for claim filing when the insured passes. Trustees should know how to file a claim with the insurer, manage proceeds received by the trust, and make distributions according to the trust terms. Periodic review of the plan ensures it remains aligned with changes in family circumstances, asset values, or law. We assist trustees with administration tasks and represent clients in any necessary court proceedings to enforce or modify trust terms.
When a claim arises, the trustee must submit the insurer’s required documentation and follow policy procedures to secure payment to the trust. After proceeds are received, the trustee handles distribution and investment in line with the trust’s instructions, while keeping beneficiaries informed through proper accounting. Timely, organized administration helps satisfy obligations such as tax reporting and allows proceeds to be used for intended purposes like paying estate liabilities or funding beneficiary needs. Trustee diligence preserves the trust’s benefits for heirs and reduces potential disputes.
Although an ILIT is irrevocable, surrounding estate planning documents and financial arrangements may require periodic review. We recommend evaluating beneficiary designations, premium funding strategies, and related estate documents in response to major life events such as births, deaths, marriages, or changes in asset ownership. Where appropriate, remedies like trust modification petitions or other court filings can address unforeseen issues in administration. Regular review helps keep the overall estate plan aligned with current objectives and ensures trustee actions continue to reflect the grantor’s intent.
An Irrevocable Life Insurance Trust is a trust that owns a life insurance policy and receives policy proceeds when the insured dies. The trust document names beneficiaries and sets out how proceeds should be managed and distributed. Because the grantor transfers ownership of the policy to the trust, the proceeds generally avoid inclusion in the grantor’s taxable estate when the transfer is properly completed. Trustees administer the trust, handle claims, and distribute proceeds according to the trust terms, providing structure and protection for beneficiaries. Setting up an ILIT involves drafting the trust, transferring ownership or arranging for the trust to purchase a policy, and documenting premium contributions. Trustees must keep records of gifts used to pay premiums and maintain clear accounting. Proper implementation ensures the ILIT functions as intended and aligns with the grantor’s broader estate goals.
Funding an ILIT usually requires transferring an existing life insurance policy to the trust or having the trust purchase a new policy. If an existing policy is transferred, ownership forms must be completed with the insurer and the trust named as owner and beneficiary. For premium payment, grantors commonly make annual gifts to the trust so the trustee can pay premiums. Documenting these gifts and keeping records is important for demonstrating proper administration. Trustees should maintain logs of premium receipts and disbursements and follow any gift tax reporting requirements when applicable. Coordination with financial advisors and insurers ensures premiums are funded on schedule, preventing lapses in coverage and preserving the intended estate planning benefits of the ILIT.
The three-year rule is a tax provision that may include transferred life insurance in a grantor’s estate if the policy was transferred within three years of the grantor’s death. Because of this rule, transfers made shortly before death can fail to achieve the intended removal of proceeds from the estate. To avoid this outcome, many clients arrange ownership transfers well before the end of life or choose to have the trust purchase a new policy. Timing also affects how premium payments are documented and whether gifts are effective for tax purposes. Early planning and prompt documentation of transfers and premium gifts protect the intended tax and distribution benefits of using an ILIT within your estate plan.
An ILIT can be structured to provide for a beneficiary with disabilities without jeopardizing means-tested public benefits. Trust provisions and careful drafting enable distributions for supplemental needs such as health care, education, or personal items while preserving eligibility for government programs. The trust language and distribution mechanisms must be tailored to avoid making the beneficiary ineligible for benefits that are based on income or assets. Coordination with special needs planning professionals and a comprehensive review of the beneficiary’s circumstances are important to craft a plan that supplements existing benefits. Proper administration by a trustee who understands the constraints of benefit programs helps ensure resources are used effectively for the beneficiary’s long-term support.
If a policy transfer into a trust is done incorrectly, the policy proceeds may be included in the grantor’s estate or lead to other unintended consequences. Mistakes can include failing to complete insurer transfer forms, funding premiums improperly, or not documenting gifts used for premium payments. When errors occur, remedies such as Heggstad petitions or trust modification petitions can sometimes correct title issues or clarify intent, but outcomes vary depending on the facts and timing. Prompt review and correction of documentation, and legal steps where necessary, can mitigate risks. Early consultation to verify transfers and maintain accurate records reduces the likelihood of problems and ensures the ILIT produces the intended benefits.
Choosing a trustee for an ILIT requires balancing administrative ability and fiduciary reliability. Good trustees maintain records, coordinate with insurers, pay premiums on time, and follow distribution instructions. Family members who are organized and available can serve, or a neutral third party or institutional trustee may be appropriate when continuity and professional administration are priorities. The trust document should name successor trustees and provide clear guidance on duties and powers. Discussing trustee responsibilities with the chosen individual and documenting expectations in the trust helps avoid disputes. Consideration of trustee availability, financial acumen, and willingness to serve over time supports effective administration for beneficiaries.
An ILIT complements a revocable living trust or will by handling life insurance proceeds separately and directing how those proceeds are used. While a revocable living trust can hold many assets and avoid probate for those assets, it does not remove life insurance proceeds from the grantor’s estate unless ownership is transferred out of the grantor’s name. An ILIT provides that separation and adds distribution controls that a will or revocable trust might not offer. Coordination among these documents is essential to avoid conflicting designations or duplication. Ensuring beneficiary designations, trustee powers, and pour-over wills align preserves the grantor’s overall plan and reduces the chance of unintended outcomes during administration.
Proceeds paid to an ILIT generally bypass probate because the trust, not the deceased’s estate, owns the policy and receives the death benefit. The trustee then administers the trust assets according to the trust’s terms, which typically permits distributions without court supervision. This outcome provides beneficiaries with faster access to funds and reduces administrative complexity compared with assets that must pass through probate. While probate is usually avoided for proceeds held in an ILIT, trustees must still manage tax filings, creditor claims, and any trust-specific reporting. Proper trust drafting and administration help ensure a smooth transfer of benefits to the intended beneficiaries without probate delays.
Yes, an ILIT can purchase a new policy owned by the trust instead of transferring an existing one. When a trust buys a new policy, ownership is clear from inception and avoids potential transfer-related issues such as the three-year rule. The trust must be the owner and the policy must be issued in the trust’s name, with trustees authorized to manage the policy on behalf of beneficiaries. Purchasing a new policy may require underwriting and coordination between the insurer and the trustee. We assist with the process to ensure documentation is correct, premiums are funded, and the trust’s terms align with the policy’s ownership to achieve intended estate planning outcomes.
Review ILITs and related estate documents periodically and after major life events such as births, deaths, marriages, divorces, or significant changes in financial circumstances. Even though an ILIT is irrevocable, how it interacts with other planning documents and financial accounts can change over time. Regular review ensures beneficiary designations and funding arrangements continue to reflect your objectives. We recommend scheduled check-ins to verify that premiums are being funded properly and that trustee records are up to date. Periodic reviews help identify potential issues early and allow for supportive actions, such as corrective petitions or coordination with other estate planning measures as family needs evolve.
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