An Irrevocable Life Insurance Trust (ILIT) is a powerful estate planning tool that can help Montclair residents manage life insurance proceeds, reduce estate tax exposure, and provide clear direction for asset distribution. At the Law Offices of Robert P. Bergman, we work with clients to explain how an ILIT functions, who should serve as trustee, and how trust ownership of a life insurance policy can affect beneficiaries and tax treatment. This introductory guide outlines the key considerations you should address before establishing an ILIT and explains the common documents that integrate with this trust to create a comprehensive estate plan.
Choosing to create an ILIT involves careful planning around policy ownership, beneficiary designations, funding requirements, and timing to avoid unintended tax consequences. An ILIT may be paired with other instruments such as pour-over wills, financial powers of attorney, health care directives, and trust certification to ensure cohesive asset management. For families in Montclair and throughout San Bernardino County, understanding the interplay between insurance policies and estate planning objectives is essential. This guide provides practical information on how an ILIT can fit into a broader estate plan and the steps typically taken to implement one.
An ILIT can preserve life insurance proceeds for beneficiaries, shelter those proceeds from estate inclusion in certain circumstances, and provide structured distributions over time. By transferring ownership of a policy into an irrevocable trust, the proceeds may be managed outside of the insured’s taxable estate, helping reduce potential estate tax exposure and protecting funds from probate. Additionally, an ILIT provides flexibility for naming trustees and customizing distribution provisions to meet family needs, protect younger beneficiaries, and address special circumstances such as blended families or beneficiary disabilities.
The Law Offices of Robert P. Bergman offers estate planning services to residents throughout California with a focus on practical, client-centered solutions. We help individuals and families design documents like revocable living trusts, wills, powers of attorney, and irrevocable life insurance trusts that work together to meet personal goals. Our approach emphasizes clear communication, thorough review of existing policies and assets, and careful drafting to reflect each client’s wishes. We aim to provide guidance that supports informed decisions and long-term peace of mind for clients and their loved ones.
An ILIT is a trust that takes ownership of a life insurance policy on the life of the grantor or another insured person. Once property or a policy is transferred into an ILIT, the grantor cannot unilaterally revoke the trust or reclaim ownership of the policy. This transfer is one reason the trust is called irrevocable. Because the policy is no longer owned by the grantor, the death benefit may be excluded from the grantor’s taxable estate if established and funded correctly and outside certain lookback periods. Proper timing, trustee selection, and coordinated beneficiary designations are key elements.
Setting up an ILIT typically involves drafting trust terms that specify distribution rules, naming trustees and successor trustees, and directing how gift tax reporting and annual gift funding will be managed. The trustee will hold the policy, receive any death benefit, and distribute proceeds according to the trust terms. Funding an ILIT often requires annual gifts to trust beneficiaries via Crummey powers or other mechanisms to allow contributions to pay policy premiums. A sound plan considers tax consequences, Medicaid planning if relevant, and integration with other estate planning documents to avoid contradictions and unintended results.
An ILIT is a legal entity created to own and control a life insurance policy for the benefit of named beneficiaries. The trust is irrevocable, meaning the grantor relinquishes ownership and control over the policy and the trust assets. The trustee administers the policy, makes premium payments from trust funds, and manages the death benefit distribution according to trust provisions. Because ownership is transferred away from the grantor, the policy proceeds can be protected from probate and, when structured properly, may be outside the grantor’s gross estate for federal estate tax purposes. Careful drafting and timing are essential to achieve intended outcomes.
Important elements when creating an ILIT include the trust document wording, appointment of a trustee, naming beneficiaries, transferring or issuing the policy in the name of the trust, and planning for premium funding. Processes often include coordination with the insurer to change ownership, annual gifting strategies to provide premium funds, and detailed recordkeeping to support tax reporting. Trustees must be prepared to manage premium payments, maintain policy records, and act in the beneficiaries’ best interests. Regular reviews ensure the trust remains aligned with changes in family circumstances, life insurance markets, or tax law.
Estate planning for life insurance involves terminology that may be unfamiliar. Understanding terms like grantor, trustee, beneficiary, Crummey withdrawal right, decedent, and estate inclusion helps clients make informed choices. These definitions clarify who has legal authority, who benefits, and how assets move through the trust. Clear definitions prevent confusion when coordinating beneficiary designations, tax filings, and trust funding strategies. This section provides concise explanations of the common terms you will encounter when establishing and administering an ILIT.
The grantor is the person who establishes the trust and transfers ownership of property or a life insurance policy into it. In ILIT contexts the grantor typically gifts premium funds to the trust and sets the terms for distribution of the death benefit. Because the trust is irrevocable, the grantor gives up ownership and direct control over the policy and the trust assets. The grantor’s intent and the timing of transfers are important for determining tax consequences, and proper documentation of gifts and transfers supports the trust’s administration over time.
A trustee manages and administers the trust according to its terms and applicable law. For an ILIT, duties often include paying policy premiums, keeping records, filing any necessary tax returns, and distributing proceeds to beneficiaries in accordance with the trust document. The trustee must act impartially among beneficiaries, maintain clear accounting, and consult with advisors when legal or tax issues arise. Naming a trustee who can manage administrative responsibilities and make prudent decisions helps the trust achieve its intended purpose and avoids delays after the insured’s death.
A Crummey withdrawal right is a limited opportunity given to trust beneficiaries to withdraw gifts to the trust for a short period, which allows those gifts to qualify as present interest for gift tax annual exclusion purposes. Trustees provide notice of the withdrawal right, and in practice beneficiaries typically do not exercise it because they intend to preserve trust assets for future distribution. Proper implementation of Crummey powers requires clear notice procedures and documentation to support gift tax treatment and ensure annual premium funding can be made without creating unintended tax exposure.
Estate inclusion refers to whether assets are considered part of a decedent’s gross estate for estate tax purposes. If a life insurance policy is owned by the grantor at death, the death benefit may be included in the grantor’s estate. Transferring policy ownership to an ILIT can remove the proceeds from the grantor’s estate if certain rules and lookback periods are observed. Determining estate inclusion requires careful timing, adherence to transfer rules, and attention to state and federal tax law to ensure the desired exclusion is achieved.
An ILIT is one of several approaches to managing life insurance within an estate plan. Alternative strategies include retaining a policy in personal ownership and naming beneficiaries directly, using a revocable living trust with different tax implications, or implementing beneficiary designations and payable-on-death arrangements. Each option involves trade-offs related to estate inclusion, probate avoidance, control over proceeds, and administrative complexity. Comparing these choices involves assessing family goals, asset size, tax considerations, and willingness to transfer ownership rights away from the insured.
For individuals with modest insurance policies and straightforward beneficiary relationships, retaining personal ownership and directly naming beneficiaries can be an efficient solution. Direct beneficiary designations avoid trust administration costs and keep proceeds payable quickly after death. When financial circumstances are uncomplicated and estate tax exposure is unlikely, a simpler approach may meet the family’s needs. It remains important to review beneficiary designations regularly and ensure they match broader estate plans to prevent unintended distributions or conflicts between documents.
If estate values are well below applicable estate tax thresholds and probate concerns are minimal, a limited approach that focuses on clear beneficiary designations and coordination with other documents may be sufficient. When estate tax exposure and creditor concerns are not present, the administrative requirements of an ILIT may outweigh its benefits. In such cases, clear communication with beneficiaries, updating beneficiary forms, and aligning titles and account designations can effectively achieve timely distribution without the overhead of trust administration.
When an estate includes substantial assets, multiple beneficiaries, or unique family dynamics such as second marriages or vulnerable beneficiaries, a trust-based strategy like an ILIT helps control distributions and reduce estate tax exposure. Trust provisions can provide staged payments, conditions for distributions, or protections against creditors and poor financial decisions. For families seeking long-term stewardship of life insurance proceeds, comprehensive planning ensures the policy functions as intended and complements other estate planning instruments to meet legacy goals and protect family members.
Complex asset mixes that include retirement accounts, business ownership, or real estate benefit from a coordinated approach that considers tax consequences and succession needs. An ILIT can be integrated into a larger plan that addresses liquidity needs to pay estate taxes, equalization among heirs, and continuity of business interests. Proper coordination prevents conflicting beneficiary designations and ensures that life insurance proceeds are available to carry out the decedent’s intentions, preserve business value, or provide for heirs who do not directly inherit other assets.
A comprehensive approach with an ILIT can provide tax planning advantages, targeted beneficiary protection, and administrative clarity after a death. It helps preserve liquidity to pay estate expenses while preventing life insurance proceeds from passing through probate. The trust structure can establish rules for distributions, protect funds from incompatible beneficiary creditors, and create a clear plan for minor or disabled beneficiaries. By documenting intentions in trust terms, families reduce the likelihood of disputes and provide trustees with a roadmap for carrying out the grantor’s wishes.
Comprehensive planning also supports long-term goals such as charitable giving or legacy planning by allowing the trust to allocate proceeds according to detailed instructions. Trustees can manage investments, pay bills, and distribute funds in a manner consistent with the grantor’s priorities. Regular reviews ensure the plan remains effective as tax law and family circumstances change. While an ILIT requires initial setup and administration, the clarity and protection it offers often justify the investment for families seeking continuity and control over life insurance proceeds.
One primary benefit of transferring a life insurance policy into an ILIT is the potential to remove the death benefit from the grantor’s taxable estate, subject to timing and transfer rules. An ILIT also helps keep proceeds out of probate, which expedites availability to beneficiaries and maintains privacy. These advantages can preserve more of the policy proceeds for intended heirs and reduce administrative burdens during an already difficult time. Properly coordinated implementation and funding strategies are necessary to realize these potential advantages.
An ILIT allows the grantor to specify how and when beneficiaries receive proceeds, which can protect funds from being squandered, safeguarded from creditors, or preserved for future needs like education or medical care. Trustees can be directed to make payments on behalf of beneficiaries or to distribute funds over time, reducing the risk of imprudent lump-sum distributions. This level of control helps families manage intergenerational wealth transfer responsibly while tailoring distributions to meet specific family goals and circumstances.
Maintaining accurate, contemporaneous records of transfers into an ILIT, premium payments made on behalf of the trust, and beneficiary notices is essential. Thorough documentation supports the intended tax treatment of gifts and demonstrates compliance with annual gifting procedures. Records should include copies of insurance assignments, trust documents, premium invoices paid by the trustee, and any notices given to beneficiaries regarding withdrawal rights. Good recordkeeping reduces confusion, simplifies administration, and helps trustees respond to questions from heirs or tax authorities.
Life events such as births, deaths, marriages, divorces, or changes in financial circumstances may require updates to the overall estate plan even though the ILIT itself is irrevocable. Periodic reviews ensure other documents, beneficiary designations, and funding strategies remain coordinated with the trust’s objectives. Trustees and grantors should revisit the trust terms and supporting documents and adapt funding approaches when necessary to maintain alignment with legacy goals and family needs.
Consider an ILIT if you wish to preserve life insurance proceeds for specific beneficiaries, reduce potential estate tax exposure, or prevent policy proceeds from passing through probate. Families with significant life insurance coverage or complex distribution objectives often find an ILIT a useful tool for controlling how death benefits are used. The trust structure offers options for staged distributions, creditor protection, and guidance for trustees, making it easier to ensure funds are used in alignment with the grantor’s intentions after their passing.
An ILIT can also be appropriate when estate liquidity needs are present, such as covering estate taxes, outstanding debts, or business succession obligations. By holding a policy in trust, proceeds are available to provide liquidity without the need to liquidate other estate assets. This strategy can be particularly beneficial for business owners or families with concentrated assets who want to preserve long-term value while meeting immediate post-death obligations. Thoughtful integration with retirement planning and trusts supports a cohesive approach to legacy management.
Typical circumstances prompting consideration of an ILIT include high net worth estates, business owners needing liquidity for succession, blended families seeking controlled distributions, and those who want protections for beneficiaries with special needs. It may also be appropriate when the estate comprises illiquid assets that could be difficult to convert quickly to pay taxes or expenses. An ILIT offers a way to designate how life insurance proceeds are used while providing clarity, privacy, and a measure of protection from probate and creditor claims.
When the total value of an estate approaches applicable estate tax thresholds, using an ILIT can help reduce estate inclusion of life insurance proceeds and support tax planning objectives. Transferring ownership of a policy to an ILIT and observing appropriate timing rules can minimize the risk that policy proceeds will be included in the grantor’s taxable estate. Families with significant assets often use ILITs as part of a coordinated plan to preserve wealth for future generations while addressing tax liabilities that may otherwise strain the estate.
Business owners may use an ILIT to ensure liquidity is available to pay taxes, buy out partners, or provide for heirs who do not participate in the business. Insurance proceeds held by a trust can fund buy-sell agreements or provide funds to maintain business continuity after an owner’s death. Structuring a trust to align with business succession objectives helps reduce pressure to sell assets under adverse conditions and preserves the long-term viability of the business while providing for family members who depend on its success.
When beneficiaries include minors, individuals with limited financial experience, or those with creditor concerns, an ILIT can set parameters for how proceeds are distributed and used. The trust document can require trustee oversight, establish staged distributions, or direct funds to be used for education, health care, or support. By providing structure and oversight, an ILIT reduces the risk that a large lump-sum payment will be misused and helps ensure that the grantor’s wishes are carried out in a measured and protective manner.
The Law Offices of Robert P. Bergman serves Montclair and surrounding communities, offering guidance on estate planning tools such as ILITs, revocable living trusts, wills, and powers of attorney. We focus on helping clients prepare clear documents, coordinate beneficiary designations, and implement funding strategies that support the plan’s goals. Our office provides practical advice about timing, trustee roles, and interactions with insurance carriers to help ensure that the plan delivers the intended protection and distribution mechanisms for families in the region.
Our firm offers a comprehensive approach to estate planning, combining legal drafting with practical strategies for funding and administering trusts. We take time to understand each client’s circumstances, family dynamics, and long-term goals to design an ILIT that aligns with those priorities. Clients benefit from clear explanations of tax and administrative implications and hands-on assistance coordinating with insurers, trustees, and other advisors to effectuate the plan.
When working with clients on life insurance trusts, we emphasize careful documentation, proper trustee selection, and coordinated beneficiary designations to avoid common pitfalls. Our process includes reviewing existing policies, advising on ownership transfers, and establishing gift funding mechanisms that support premium payments. We aim to streamline administration, reduce uncertainty for heirs, and create trust terms that provide durable protection and flexibility for changing family needs.
Clients receive personalized attention and a clear roadmap for implementing an ILIT as part of a larger estate plan. From initial planning conversations to final trust funding and insurer coordination, we provide consistent support to ensure the trust performs as intended. Our goal is to help families create practical structures that protect beneficiaries, provide liquidity when needed, and reduce the risk of estate-related disputes.
Our planning process begins with an initial consultation to assess goals, existing policies, and family circumstances, followed by drafting trust documents tailored to each client’s needs. We coordinate policy transfers and premium funding arrangements, prepare necessary notices to beneficiaries, and provide trustee guidance for administration. After implementation we offer follow-up reviews to address changes in assets, family situations, or law, ensuring the trust continues to serve the client’s intentions and that trustees have the necessary documentation to act effectively.
The first step involves reviewing life insurance policies, beneficiary designations, and existing estate documents to identify how an ILIT could achieve client objectives. We discuss funding methods for premiums, trustee selection, and timing considerations to avoid adverse tax consequences. During this phase we gather financial information, discuss distribution preferences, and identify potential coordination issues with retirement accounts, business interests, and other assets, creating a clear plan to move forward.
We examine current policy terms, ownership status, and beneficiary designations to determine whether transferring an existing policy into a trust or issuing a new policy in the trust’s name best meets the client’s goals. This review includes confirmation of insurability, premium schedules, and any restrictions on transfers. Clear documentation and insurer coordination are essential to ensure the change in ownership is completed correctly and does not inadvertently create estate inclusion or coverage gaps.
Funding the ILIT requires careful planning to ensure premiums are paid without creating unintended tax consequences. We review gifting strategies, the use of annual exclusion gifts with Crummey powers, and the trustee’s authority to accept and use funds. The goal is to create a practical funding plan that keeps the policy in force while maintaining the tax benefits and protecting the long-term integrity of the trust structure.
Once the planning decisions are finalized, we prepare the trust document, work with the insurer to transfer or issue the policy in the trust’s name, and set up the funding mechanisms. Trust language addresses distribution rules, trustee powers, successor trustee appointments, and beneficiary protections. Clear instructions and coordination at this stage reduce the risk of administrative errors and help ensure the trust functions as intended when the insured passes away.
Trust documents are drafted to reflect the grantor’s distribution preferences, naming trustees and specifying administration powers necessary to maintain the policy, pay premiums, and distribute proceeds. Provisions can include gift powers, trust accounting requirements, and guidance for trustee decision-making. Clear, precise drafting minimizes ambiguity and supports efficient administration by trustees when the trust becomes active.
We assist with the insurer’s forms and procedures to move ownership of an existing policy to the trust or to issue a new policy directly to the ILIT. This coordination confirms the trust is recognized as the policy owner and that beneficiary designations are consistent with trust objectives. Proper coordination avoids coverage interruptions and helps achieve the intended estate planning benefits of holding the policy in trust.
After the trust is established and funded, ongoing administration includes maintaining records, making premium payments, providing beneficiary notices as needed, and conducting periodic plan reviews. Trustees should be supported with clear accounting procedures and guidance on fulfilling their duties. Regular reviews over time ensure the ILIT remains appropriate as laws evolve, family situations change, and financial circumstances develop.
Trustee responsibilities include paying premiums, keeping accurate records of gifts and payments, and managing communications with beneficiaries. We provide guidance to trustees regarding documentation, notice requirements, and tax recordkeeping so they can fulfill their duties effectively. Consistent recordkeeping ensures a smooth administration process and supports any necessary filings or inquiries that arise during the life of the trust or after the insured’s death.
Regular reviews help confirm that the ILIT and related estate planning documents remain aligned with the grantor’s goals and current law. Reviews may address changes in beneficiaries, adjustments in funding, changes in trust administration personnel, and coordination with other estate documents. Periodic updates reduce the risk of conflicts and help maintain the effectiveness of the trust over time as family and financial situations evolve.
An Irrevocable Life Insurance Trust is a legal entity created to own a life insurance policy and manage proceeds for the benefit of named beneficiaries. The grantor places the policy into the trust, relinquishing ownership so that the trustee becomes responsible for premium payments and administration. Upon the insured person’s death, the trustee receives the life insurance proceeds and distributes them according to the trust terms, which can specify immediate payments, staggered distributions, or continued management to meet beneficiaries’ ongoing needs. Creating an ILIT requires careful drafting to set trustee powers, beneficiary provisions, and funding mechanisms. Once established, the trust operates independently from the grantor, providing a mechanism to control use of policy proceeds and potentially reduce the inclusion of those proceeds in the grantor’s estate. Proper coordination with insurers and attention to timing and gift mechanics are essential to achieve intended benefits and avoid unintended tax consequences.
Transferring a life insurance policy to an ILIT can remove the associated death benefit from the grantor’s taxable estate, but this outcome depends on timing and transfer rules. If the transfer occurs well before the insured’s death and the grantor truly gives up ownership and control, proceeds may be excluded from the gross estate. However, transfers made within applicable lookback periods or where control is retained may result in estate inclusion, so planning must consider timing and the nature of control retained after the transfer. Achieving exclusion requires careful implementation, including changing ownership records, adjusting beneficiary designations, and following proper funding protocols. Consulting with legal counsel and coordinating with the insurer ensures the transfer is performed correctly. Documentation of the transfer and related gifts is important to support the intended tax treatment and reduce the risk of unintended estate inclusion.
Once an ILIT owns a policy, the trustee is responsible for ensuring premiums are paid to keep the policy in force. Typically, the grantor makes annual gifts to the trust to cover premiums, often using gift tax annual exclusions with Crummey withdrawal rights to create present-interest gifts. The trustee uses these funds to pay premiums and maintain the policy. Trustees must keep careful records of gifts, notices, and premium payments to demonstrate proper administration and support any tax positions taken. Alternative funding arrangements may include larger initial gifts, contributions from other family members, or the trust holding liquid assets that generate income to pay premiums. Regardless of the chosen method, funding must be reliable and documented to prevent policy lapses and to preserve the goals of the ILIT. Ongoing communication among grantors, trustees, and beneficiaries helps ensure funding remains uninterrupted over time.
Selecting an appropriate trustee is an important decision when creating an ILIT. The trustee should be someone or an institution capable of managing administrative duties, maintaining records, paying premiums, and making discretionary distributions in accordance with the trust terms. Trustees may be family members, trusted friends, professional fiduciaries, or financial institutions, each with different strengths and considerations related to impartiality, longevity, and administrative capacity. When choosing a trustee, consider the trustee’s availability, financial acumen, and willingness to fulfill ongoing responsibilities. Designating successor trustees and clear trustee powers in the trust document helps ensure continuity and avoids administrative difficulties in the future. Clear instructions and professional guidance for trustees reduce the risk of disputes and help ensure the trust performs as intended for beneficiaries.
An ILIT can protect policy proceeds from probate because the trust, not the personal estate, owns the insurance policy. When structured and funded properly, proceeds payable to the trust bypass probate and are administered according to the trust document. This often accelerates access to funds and preserves privacy for the family. However, protection from creditors depends on the nature of the beneficiaries and the particular legal circumstances; trust provisions and applicable law influence the degree of creditor protection available. While an ILIT provides important administrative and distribution protections, it is not a universal shield against all creditor claims. For some beneficiaries or in certain legal scenarios, creditors may still have remedies depending on state law and the timing of transfers. Reasonable expectations about creditor protection should be discussed during the planning process so the trust structure can be tailored to the family’s needs and legal landscape.
A Crummey withdrawal right gives beneficiaries a short-term opportunity to withdraw gifts made to the trust, which transforms the gift into a present-interest gift eligible for the annual gift tax exclusion. Trustees provide notice of the withdrawal right to beneficiaries, and because the withdrawal window is typically brief, beneficiaries often choose not to exercise it, allowing the funds to remain in the trust for premium payments. Properly implemented Crummey powers support routine premium funding while preserving tax advantages for contributors. Implementing Crummey rights requires clear notice procedures and documentation demonstrating that beneficiaries received the right to withdraw. Trustees must maintain records of notices, withdrawal periods, and whether withdrawals were exercised. This process ensures that gifts used to fund premiums can qualify for annual exclusion treatment, reducing potential gift tax exposure while enabling the trust to remain funded.
An ILIT should be integrated with the rest of an estate plan, including wills, revocable living trusts, powers of attorney, and health care directives. Coordination ensures beneficiary designations are consistent, that overlapping documents do not create conflicts, and that liquidity needs are covered. For instance, an ILIT can complement a revocable trust by providing dedicated funds for estate taxes or specific beneficiaries without commingling with other trust assets, and a pour-over will helps capture assets that were not otherwise titled into the revocable trust. Regular reviews of the entire estate plan help identify inconsistencies, coordinate funding strategies, and confirm that all documents work together to reflect the grantor’s intentions. Updating beneficiary designations and ensuring that trust terms align with broader planning objectives reduces the risk of unintended outcomes and provides a coherent framework for trustees and heirs to follow after the grantor’s death.
If the grantor dies shortly after transferring a policy into an ILIT, the timing can affect whether the death benefit is included in the grantor’s estate. Transfers made within applicable lookback periods may be subject to estate inclusion rules, so it is important to consider timing when planning a transfer. When transfers occur well in advance of the grantor’s death and are properly documented, the likelihood of exclusion from the estate is greater. Proper planning and timing are essential to achieving intended tax outcomes. Unexpected events underscore the importance of implementing a comprehensive plan with careful documentation and coordination with insurers. Even when estate inclusion rules apply, the trust may still serve important administrative and beneficiary protection purposes. Discussing contingency scenarios helps ensure the plan includes fallback mechanisms and clear guidance for trustees to follow in varying circumstances.
Depending on the trust structure and funding, there may be reporting or tax filing requirements associated with an ILIT. Trustees should maintain accurate records of gifts, premiums paid, notices to beneficiaries, and policy administrative actions. In some cases, gift tax returns may be necessary if annual exclusion limits are exceeded or if multiple donors contribute to premium funding. Trustees should be aware of any income tax reporting obligations that arise from trust activities, although death benefits themselves are typically received by the trust income tax-free. Keeping transparent records and seeking appropriate tax guidance helps trustees fulfill their responsibilities and ensures compliance with reporting rules. Documentation demonstrating the trust’s funding and administration supports positions taken on gift tax and estate tax matters. Periodic consultation with tax professionals helps address filing requirements and maintain proper documentation for potential future inquiries.
Yes, funding premiums through annual exclusion gifts is a common method for supporting an ILIT. Donors may make yearly gifts to the trust up to the gift tax annual exclusion amount, and when combined with Crummey withdrawal rights, these gifts can qualify as present-interest gifts and avoid gift tax consequences. The trustee then uses those funds to pay insurance premiums and maintain the policy. Careful notice and documentation ensure the gifts are treated as intended for tax purposes. When premium amounts exceed annual exclusion limits, additional planning may be required, such as splitting gifts between spouses or filing gift tax returns. Donors should monitor aggregate gifts from multiple contributors and maintain records of notices and gift receipts. Thoughtful implementation of annual exclusion funding supports ongoing premium payments while minimizing gift tax exposure and maintaining the ILIT’s benefits over time.
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