An Irrevocable Life Insurance Trust (ILIT) is a legal planning tool that allows Lakeside residents to remove life insurance proceeds from their taxable estate while preserving benefits for family and beneficiaries. This guide explains how an ILIT works, what it can achieve for your financial and estate planning objectives, and common considerations under California law. If you own significant life insurance policies or anticipate large estate tax exposure, understanding the mechanics and implications of an ILIT can help you make informed choices that align with your long-term goals and family needs.
Choosing to establish an ILIT requires careful coordination with existing estate planning documents such as wills, revocable living trusts, powers of attorney, and health care directives. In Lakeside and throughout San Diego County, integrating an ILIT with other instruments like pour-over wills, certification of trust, and retirement plan trusts ensures a smooth transfer of assets and minimizes unintended tax or probate consequences. This guide outlines practical steps, typical timelines, and the documentation commonly used to set up and fund an ILIT so you can protect your family’s financial future effectively.
An ILIT offers several benefits that can be particularly valuable for families with life insurance policies that would otherwise be included in a taxable estate. By placing a policy into an ILIT, the policy proceeds are typically excluded from estate taxation and distributed according to the trust’s terms, providing liquidity to cover taxes, debts, or to maintain family financial stability. Additionally, an ILIT can protect proceeds from creditors, manage distributions for beneficiaries who may not be able to handle a lump sum, and coordinate with other trust-based planning to support long‑term wealth preservation and charitable goals.
The Law Offices of Robert P. Bergman serves clients across San Diego County, including Lakeside and surrounding communities, with a focus on thoughtful estate planning and trust administration. Our team helps individuals and families evaluate the role an ILIT can play alongside wills, revocable living trusts, and related instruments such as financial powers of attorney and advance health care directives. We take a practical approach to drafting tailored trust provisions, coordinating beneficiary designations, and guiding clients through funding and maintenance of the trust to meet each family’s priorities and legal requirements.
An ILIT is a trust designed specifically to own life insurance policies. When properly drafted and funded, ownership and incidents of ownership transfer to the trust, which typically removes the life insurance proceeds from the insured’s taxable estate. Setting up an ILIT requires careful attention to timing, premium payment mechanisms, and trustee powers to ensure the transfer is respected for estate tax purposes. The trust document will specify beneficiaries, distribution conditions, and instructions for managing policy proceeds so that the grantor’s intentions are followed after death.
Funding an ILIT often involves gifting cash to the trust to cover premium payments or transferring an existing policy into the trust, subject to specific rules to avoid estate inclusion during a three-year lookback period. Trustees have fiduciary duties to manage the trust assets and to make distributions according to the trust terms, which can include staggered payments, support for dependents, or funding other trusts. Understanding the interaction between the ILIT, beneficiary designations, and other estate planning documents is essential for achieving the desired tax and probate outcomes.
An Irrevocable Life Insurance Trust is a trust agreement that becomes irrevocable once executed and funded with a life insurance policy or with gifts used to pay premiums. Because the trust is irrevocable, the grantor typically relinquishes control over the policy and the proceeds, which helps exclude the proceeds from the grantor’s taxable estate if established and funded correctly. The trust names beneficiaries who will receive policy proceeds according to the trust’s terms, and it appoints a trustee to manage the trust assets, pay premiums if applicable, and handle administration tasks to fulfill the grantor’s objectives.
Creating an ILIT involves drafting the trust document, naming a trustee and successor trustees, designating beneficiaries, and specifying how insurance proceeds should be used or distributed. Common processes include determining whether to transfer an existing policy or to have the trust acquire a new policy, establishing premium funding methods, and coordinating gifts to the trust to cover ongoing premium obligations. Trustees must also handle trust administration, maintain records, notify beneficiaries when required, and work with insurance carriers to ensure ownership and beneficiary designations reflect trust terms.
Familiarity with key terms helps when setting up an ILIT. Important concepts include ‘grantor’ who creates and funds the trust, ‘trustee’ who manages the trust assets, ‘beneficiary’ who receives distributions, and ‘incidents of ownership’ which determine estate inclusion. Other relevant terms include ‘lookback period’ relating to transfers made within three years of death, ‘gift tax’ considerations for premium funding gifts, and ‘trust administration’ tasks required of the trustee. Understanding these terms helps you ask the right questions and structure the trust to meet your objectives under California law.
The grantor is the person who establishes the ILIT and typically transfers ownership of a life insurance policy or gifts funds to the trust for premium payments. Once the trust is irrevocable, the grantor generally gives up ownership and control over the policy and the payments, which is important for removing the policy proceeds from the taxable estate. The grantor’s initial decisions regarding trustee selection, beneficiary designations, and distribution terms shape how the trust operates and how proceeds will be managed for the benefit of the named beneficiaries after the grantor’s death.
The trustee is the individual or entity charged with managing the ILIT according to its terms and with a duty to act in the beneficiaries’ best interests. Trustees handle administrative duties such as paying premiums when funds are available, communicating with the insurance company, keeping records, filing tax returns if required, and distributing proceeds as directed by the trust document. Effective trustee selection is important because the trustee’s responsibilities include ensuring the trust remains compliant with applicable laws and that the grantor’s distribution goals are fulfilled.
Incidents of ownership refer to the privileges and powers associated with a life insurance policy, such as the ability to change beneficiaries, surrender the policy, or borrow against its cash value. If the grantor retains incidents of ownership at death, the policy proceeds may be included in the grantor’s taxable estate. Properly transferring those incidents to the ILIT is a critical step in ensuring estate exclusion, which is why careful drafting and coordination with the insurance carrier are required when changing ownership and beneficiary designations.
The lookback period generally refers to a three-year timeframe before the grantor’s death during which transfers of life insurance policies to an ILIT may still be included in the grantor’s estate. If a policy is transferred into the trust within three years of the grantor’s death, the policy proceeds could be taxable in the estate. Planning ahead helps avoid this outcome, but when last-minute changes are needed, there are alternative strategies depending on the circumstances. Discussing timing and transfer methods early reduces the risk of unintended tax inclusion.
An ILIT differs from other estate planning options by focusing specifically on life insurance ownership and the management of proceeds outside the grantor’s taxable estate. While a revocable living trust provides flexible control and probate avoidance, it does not remove life insurance from the estate if the grantor retains ownership. A pour‑over will works with a living trust to gather assets at death, but an ILIT provides additional tax and creditor protection for policy proceeds. Comparing these tools involves weighing control, tax outcomes, funding methods, and how each instrument fits into your family plan.
A limited approach that leaves a life insurance policy outside an ILIT may be reasonable for individuals whose policy values are modest relative to their overall estate and who do not face significant estate tax risk. In those situations, the administrative burden of creating and maintaining an ILIT may outweigh the potential benefits. However, even when policies are smaller, it is important to review beneficiary designations and coordinate with wills and other trusts so that proceeds are distributed in line with the grantor’s intent and so family members are not surprised by unexpected outcomes at the time of a benefit distribution.
For individuals nearing the end of life or for those unable to reliably fund premiums through gifts to a trust, a limited approach may be more practical. Transferring a policy into an ILIT within a short timeframe can trigger the three-year lookback rule and may not achieve the desired estate exclusion. In these instances, reviewing alternative techniques such as beneficiary designations or using other estate planning instruments may provide a better balance between administrative practicality and achieving family objectives without creating unintended tax or legal complications.
When an estate includes significant assets, complex ownership structures, or potential tax exposure, a comprehensive planning approach that integrates an ILIT with revocable living trusts, retirement plan trusts, and other instruments can provide a cohesive solution. Coordinated planning helps ensure that life insurance proceeds are available where needed and that beneficiary designations, trustee powers, and distribution terms work together to minimize tax exposure while supporting the grantor’s long-term objectives. A holistic review reduces the risk of conflicting documents and unintended tax consequences.
A comprehensive approach is often appropriate when beneficiaries include minors, individuals with special needs, or those with creditor exposure, or when the grantor wants to fund specific legacy or charitable goals. An ILIT can be drafted to distribute proceeds in stages, fund other trusts such as special needs trusts or pet trusts, or provide support while limiting direct access to lump sums. Integrating these provisions across estate planning documents helps preserve assets for intended purposes and reduces the chance of misalignment between goals and implementation.
Integrating an ILIT into a broader estate plan can enhance tax efficiency, provide creditor protection, and ensure that insurance proceeds are used according to specific family priorities. When coordinated with a revocable living trust, pour-over wills, and other instruments such as health care directives and financial powers of attorney, an ILIT fits into an overall strategy that addresses end-of-life decision making, asset management, and distribution. This alignment helps avoid gaps or conflicting instructions that might otherwise create delays, disputes, or unintended tax consequences for the family.
A comprehensive strategy also improves clarity for trustees and beneficiaries, reduces administrative friction after a death, and can simplify the trustee’s role by establishing clear funding instructions and distribution triggers. By addressing how life insurance proceeds interact with other assets, the plan can provide immediate liquidity to cover debts and expenses, support ongoing family needs, and carry forward philanthropic intentions. Thoughtful drafting and careful coordination with insurance carriers and financial institutions are essential to realize these benefits in practice.
One primary benefit of placing a life insurance policy in an ILIT and integrating it with other estate-planning tools is the potential removal of policy proceeds from the taxable estate, which may reduce estate taxes and preservation of wealth for beneficiaries. When done correctly and well before death, the trust ownership structure helps ensure that the proceeds are distributed according to trust terms rather than being subject to probate or estate administration. This approach can provide liquidity and peace of mind that family obligations and legacy goals will be met efficiently.
An ILIT allows the grantor to control how and when beneficiaries receive life insurance proceeds, which can protect funds from creditors and reduce the chances of imprudent spending. Through careful drafting, the trust can impose distribution conditions, schedule staggered distributions, or direct funds to other protective trusts such as special needs trusts. This level of control supports long-term financial security for beneficiaries by providing oversight and structure to how insurance proceeds are managed and used for their intended purposes.
Begin planning for an ILIT well before you anticipate needing it, so transfers of policy ownership and premium funding do not fall within the three-year lookback period before death. Early coordination with your revocable living trust, pour-over will, beneficiary designations, and retirement plan documents reduces the likelihood of unintended estate inclusion and ensures that proceeds are distributed as you intend. Early planning also gives you time to select a trustee who understands their duties and to implement premium funding strategies that align with your broader financial plan.
Keep meticulous records of gifts to the ILIT, premium payments, correspondence with the insurance company, and trustee decisions. Regular communication with trustees and beneficiaries about the trust’s purpose and processes helps avoid confusion and ensures the trust can operate smoothly when needed. Periodic reviews of the ILIT alongside other estate planning documents are advisable to reflect changes in family circumstances, law, or financial goals. Good documentation supports efficient administration and helps preserve your intentions for future generations.
Consider an ILIT if you want life insurance proceeds to be managed and distributed outside of probate and potentially outside of your taxable estate. This can be especially important for individuals with significant life insurance coverage, property holdings, business interests, or estate values that may push them into higher estate tax brackets. An ILIT also provides flexibility to design distributions for beneficiaries who may need long-term financial supports, such as children, dependents with special needs, or relatives facing creditor exposure, while maintaining privacy and orderly administration.
Another reason to consider an ILIT is the desire for controlled distributions and protection of proceeds from creditors or misuse. The trust format allows you to define when and how funds are released, to appoint trustees to oversee management, and to coordinate with other trusts that address specific circumstances like special needs trusts or pet trusts. If your planning goals include charitable giving, an ILIT can also be structured to provide lifetime or testamentary gifts that carry out philanthropic objectives alongside family provisions.
Common circumstances that prompt consideration of an ILIT include owning substantial life insurance policies, anticipating estate tax exposure, having beneficiaries who require protections, or seeking to preserve assets for future generations. Business owners sometimes use ILITs to provide liquidity for buy-sell agreements or to protect business succession planning. Families with blended structures or complex beneficiary needs may also benefit from the control and protective features an ILIT provides. Each scenario requires tailored analysis so the trust terms and funding approach match the family’s goals.
When life insurance holdings are large relative to a grantor’s overall estate, placing policies into an ILIT can help remove those proceeds from estate calculations, reduce estate tax exposure, and preserve wealth for heirs. This strategy is particularly useful where insurance proceeds are intended to provide liquidity for estate obligations or to equalize inheritances among beneficiaries. Proper timing, funding, and coordination with other estate documents ensure that the desired tax and distribution results are achieved without unintended consequences.
If beneficiaries include individuals with special needs, or those who face creditor exposure or other financial vulnerabilities, an ILIT can be structured to provide ongoing support without disqualifying benefits or leaving assets exposed. Directing insurance proceeds through trusts tailored for protection and oversight helps balance immediate financial needs with long-term preservation. Complementary documents, such as special needs trusts and health care directives, are often incorporated into a multi-faceted plan to address both financial and personal care considerations for vulnerable family members.
Business owners and individuals with illiquid assets may use ILIT proceeds to provide liquidity for estate settlement, transfer taxes, or buy-sell arrangements. An ILIT can ensure that funds are available to cover debts, taxes, and other obligations without forcing the sale of a family business or real property at an inopportune time. Proper coordination with corporate documents, buy-sell agreements, and retirement plan trusts enhances the stability and continuity of business operations while protecting family wealth for future generations.
The Law Offices of Robert P. Bergman is available to assist Lakeside residents with setting up and administering Irrevocable Life Insurance Trusts and related estate planning matters. We provide personalized guidance on selecting trustees, funding strategies, coordinating beneficiary designations, and integrating ILITs with revocable living trusts, wills, powers of attorney, and health care directives. Our approach emphasizes practical solutions that reflect your family’s needs and goals, while helping you navigate timing, tax considerations, and document maintenance to ensure your plan performs as intended.
Clients turn to the Law Offices of Robert P. Bergman for clear guidance on the legal and practical aspects of ILIT planning. We help clients evaluate whether an ILIT fits within their overall estate plan and design trust provisions that reflect their wishes for distribution, protection, and tax considerations. Our role includes coordinating with insurance companies and financial advisors to ensure transfers and premium funding are handled correctly, and providing trustees with the documentation and instructions they need to fulfill trust duties confidently.
Our firm assists with drafting precise trust language, establishing funding mechanisms such as annual gifts or Crummey notices when appropriate, and reviewing beneficiary designations to align with trust goals. We also help families anticipate future events by naming successor trustees, outlining trustee powers, and suggesting administrative procedures that promote smooth trust operation. For families with complex needs, such as special needs planning or business interests, we work to coordinate ILIT provisions with complementary instruments to achieve cohesive results.
We prioritize clear communication so clients understand the implications of placing a policy into an ILIT, including the lookback period and the importance of timely funding. Our goal is to provide clients with a durable plan that meets current needs while remaining adaptable to future changes. Whether working through initial setup, funding transfers, or post-settlement administration, we support families in implementing trust-based solutions that focus on preserving financial security and honoring legacy intentions for generations to come.
Our process begins with an initial consultation to review your life insurance holdings, estate planning documents, family circumstances, and goals. We assess whether an ILIT is appropriate, discuss funding options, and explain the implications of timing and trustee selection. If you proceed, we draft a tailored trust agreement, coordinate policy transfers or trust acquisitions, and provide guidance on documentation and gift strategies. We also outline trustee responsibilities and offer ongoing support for administration and any necessary trust amendments or related filings.
In the initial review we evaluate your current estate planning documents, existing life insurance policies, and family needs to determine whether an ILIT aligns with your objectives. This stage involves a careful review of policy ownership, beneficiary designations, and timelines to address the three-year lookback rule and other tax considerations. We will identify potential coordination points with revocable trusts, pour-over wills, retirement plan trusts, and other instruments so the ILIT integrates smoothly into your comprehensive estate plan.
We collect relevant documents, including policy contracts, trust documents, wills, powers of attorney, and any corporate agreements that may affect funding or beneficiary designations. Reviewing these materials helps us determine whether to transfer an existing policy into the ILIT or to have the trust acquire a new policy. We also review premium amounts and funding sources so the trust can be structured to receive gifts that cover ongoing premium payments when necessary.
At this stage we discuss trustee selection, successor trustees, and beneficiary designations with you and potential fiduciaries if desired. Clear agreements about trustee powers and communication expectations reduce the risk of future disagreements. We also explore whether distributions should be immediate or staged, and whether proceeds should be directed to other trusts such as special needs trusts, pet trusts, or charitable beneficiaries, aligning the ILIT’s terms with your broader family and legacy objectives.
After confirming goals and arrangements, we draft the ILIT document with provisions tailored to your needs and California law. The trust identifies trustees, beneficiaries, distribution instructions, and administrative powers. Funding the trust may involve transferring ownership of an existing policy, having the trust purchase a new policy, or making gifts to the trust to pay premiums. We coordinate with insurance carriers and financial advisors to implement transfers properly and document gifts and premium payments to ensure compliance with tax and trust administration requirements.
We draft clear trust terms that articulate distribution triggers, trustee duties, and any special provisions such as provisions for minor beneficiaries or those with special needs. The trust also includes administrative powers needed to operate effectively, such as the ability to receive gifts, manage investments, and communicate with insurance carriers. Thoughtful drafting reduces ambiguity and supports efficient administration when the trust becomes active after the grantor’s death.
Implementing ownership transfers requires coordination with the life insurance company to change policy ownership and beneficiary designations to the ILIT. If gifts are used to fund premiums, we document gift transfers, provide guidance on necessary notices, and advise on potential gift tax filings where applicable. Maintaining proper documentation of transfer and funding steps is essential to reduce the risk of estate inclusion and to provide a clear record of the trust’s financial history.
Once the ILIT is established and funded, ongoing administration includes premium payment coordination, maintaining accurate records, filing required tax returns if applicable, and communicating with beneficiaries per the trust terms. Periodic reviews are recommended to ensure the ILIT remains aligned with your overall estate plan and reflects changes in life circumstances, tax law, and family needs. Trustees should also be prepared to handle claims and distributions efficiently when the policy proceeds become payable.
We provide trustees with templates, checklists, and guidance for proper recordkeeping, premium payment tracking, and communications with beneficiaries and the insurance company. Good recordkeeping supports transparency and reduces the risk of disputes. Trustees must keep copies of policy documents, trust paperwork, and records of any gifts or premium payments, and we can assist in preparing any necessary tax forms and in responding to creditor inquiries or other administrative matters that arise during trust administration.
Regular reviews of the ILIT and related estate documents help ensure that changes in family circumstances, financial situations, or law are reflected in the plan. While the ILIT itself is generally irrevocable, complementary planning for other assets and successor trustee designations can be updated as needed. Periodic meetings allow for assessment of whether additional funding or supplemental instruments, such as special needs trusts or trust modifications, are advisable to meet evolving goals while maintaining the integrity of the ILIT structure.
An Irrevocable Life Insurance Trust (ILIT) is a trust specifically designed to hold and control life insurance policies so that proceeds are managed and distributed according to the grantor’s instructions outside of probate. Unlike a revocable living trust, which the grantor can amend or revoke during their lifetime, an ILIT is irrevocable once properly executed and funded, meaning the grantor generally relinquishes ownership and certain powers over the policy. This transfer of ownership can help remove life insurance proceeds from the taxable estate if done with proper timing and documentation. A revocable living trust provides flexibility and centralized management of assets during incapacity and can avoid probate for many assets, but it does not, by itself, remove life insurance from the grantor’s estate if the grantor retains policy ownership. An ILIT is focused on the tax and distribution treatment of life insurance and is often used in combination with a revocable trust and other documents to accomplish comprehensive estate planning goals while providing controlled and protected distributions to beneficiaries.
Transferring a life insurance policy to an ILIT generally removes the policy proceeds from the grantor’s taxable estate if the transfer is made well before death and the grantor no longer retains incidents of ownership. When ownership and control shift to the trust, the proceeds are payable to the ILIT and are distributed according to the trust’s terms, which can reduce estate tax exposure and help preserve wealth for beneficiaries. Proper execution, funding, and documentation are essential to support the intended estate tax treatment. If a policy is transferred too close to the grantor’s death, however, the proceeds may still be includable in the estate under the applicable lookback rules. Additionally, premium funding and gift tax implications should be considered, since gifts to the trust to pay premiums may require appropriate notices or filings. Careful planning helps ensure that transfers and funding align with your estate planning and tax objectives.
The three-year lookback rule generally means that if a life insurance policy is transferred to an ILIT within three years of the grantor’s death, the proceeds may be included in the grantor’s estate for tax purposes. This rule prevents last-minute transfers from achieving estate exclusion and is intended to ensure that transfers are made well in advance of the insured’s death if estate tax avoidance is the objective. Timing is therefore an important consideration when deciding whether to transfer an existing policy into a trust or to have the trust purchase a new policy. Because of the lookback period, many clients plan transfers and funding well ahead of time to avoid inclusion risks. If a transfer is needed within that window, there may be alternative strategies to achieve some objectives, such as changing beneficiaries or coordinating other estate planning instruments. Discussing options early provides more flexibility and reduces the risk of unintended tax consequences at the time of death.
The trustee of an ILIT is responsible for managing the trust according to its terms, which includes dealing with the insurance company, making premium payments if funds are available, maintaining records, and distributing proceeds to beneficiaries as directed. A trustee should be someone trustworthy and capable of handling administrative duties and decisions under the trust’s instructions. Many grantors choose a family member, a trusted friend, or a professional fiduciary depending on the complexity of the trust and the needs of the beneficiaries. Trustees must follow fiduciary duties and act in the beneficiaries’ best interests while adhering to the trust document and applicable law. Naming successor trustees ensures continuity if the initial trustee cannot serve. Clear trustee powers and guidance in the trust document help the trustee perform tasks such as investing funds, communicating with beneficiaries, and handling tax or legal matters related to the trust, thereby reducing the likelihood of disputes or administrative delays.
An ILIT can provide a degree of protection for insurance proceeds from the creditors of beneficiaries when the trust is structured properly and distributions are made through the trust rather than directly to beneficiaries. By directing proceeds to be held and distributed by the trustee, the trust can limit direct access to funds and create protections against immediate creditor claims in many cases. This structure can be particularly helpful for beneficiaries at risk of losing assets to creditors or for those who need oversight in managing distributions. However, the level of protection can depend on the trust terms, timing, and applicable state law, as well as whether distributions are made in ways that expose funds to claims. It is important to draft provisions that align with your protection goals and to coordinate with other planning tools, such as spendthrift clauses or supplemental protective trusts, to enhance asset preservation for intended beneficiaries while complying with legal requirements.
Premiums for a policy owned by an ILIT are usually paid by gifts the grantor makes to the trust, which the trustee then uses to pay the insurance premiums. These gifts are often structured as annual transfers, and in many cases the trust will use Crummey provisions to give beneficiaries a temporary right to withdraw gifts so they qualify for the annual gift tax exclusion. Proper documentation of gifts and coordination with tax rules helps ensure that funding occurs smoothly and in a way that supports the ILIT’s legal and tax objectives. Alternatively, if the trust purchases a new policy, the trustee may receive the initial premium from the trust funding and then manage ongoing premiums according to the trust terms. Clear funding instructions and recordkeeping are essential so premiums are paid timely and so the trust maintains the policy in force until the need for proceeds arises, thereby preserving the intended benefits to beneficiaries.
If an ILIT is not funded properly, the intended benefits may be compromised. For instance, failing to transfer ownership correctly or to fund premiums can result in the policy lapsing or the proceeds being included in the grantor’s estate, defeating the purpose of the ILIT. Improper documentation or missed premium payments may also expose the gifted funds to questions or administrative complications. Ensuring transfers are executed with the insurance carrier and maintaining records of gifts and payments helps protect the trust’s intended outcomes. When funding issues arise, there may be remedial options depending on the circumstances, but those solutions can be limited and may not fully restore intended tax results. Periodic reviews and timely action to provide gifts, maintain premiums, and update documentation reduce the risk of funding-related failures. Trustees and grantors should keep open lines of communication with advisors to address any shortfalls promptly.
Both transferring an existing policy into an ILIT and having the trust purchase a new policy are common approaches, and the right choice depends on timing, policy terms, and tax considerations. Transferring an existing policy requires care to avoid incidents of ownership remaining with the grantor and to respect the three-year lookback rule. If a policy is transferred within the lookback period, the proceeds may still be includable in the estate. Existing policies may also have cash values or loan features that require special handling. Having the ILIT purchase a new policy simplifies timing concerns, since the trust owns the policy from inception, but it requires the trust to be funded to pay premiums. The decision between transfer and new purchase should be made after reviewing policy provisions, premium amounts, and your overall estate plan so that the chosen route aligns with your objectives and minimizes unintended tax implications.
An ILIT should be coordinated with other estate planning documents such as revocable living trusts, pour-over wills, financial powers of attorney, and advance health care directives so all instruments work together. The ILIT typically handles life insurance proceeds while the revocable trust and wills address other assets and distribution schemes. Ensuring beneficiary designations on insurance and retirement accounts are consistent with trust goals prevents conflicts and unintended consequences at the time of distribution. Powers of attorney and health care directives remain important for incapacity planning, while the ILIT focuses on post-death insurance proceeds. Regular reviews of all documents ensure they remain aligned with changing family situations and legal considerations. Coordinating these instruments reduces the risk of probate delays, tax surprises, or conflicting instructions that could complicate administration for trustees and heirs.
If you think an ILIT might benefit your family, start by gathering existing insurance policies, trust documents, wills, and beneficiary designations, and schedule a planning review to discuss your goals. Early evaluation helps determine whether transferring an existing policy is appropriate or whether the trust should acquire a new policy. It also allows time to establish funding strategies and to select trustees who will carry out your intentions for distributions and administration. Engage in a comprehensive review of your estate plan to identify potential coordination needs with revocable trusts, retirement plan trusts, pour-over wills, and health care directives. Document gifts for premium funding, plan for successor trustee arrangements, and consider how the ILIT fits into your long-term goals for asset protection, family care, and legacy planning so the trust operates as intended when it becomes active.
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