An Irrevocable Life Insurance Trust (ILIT) can be a powerful component of an estate plan for residents of Lompoc and Santa Barbara County. This page explains how an ILIT works, why a trust might be used to hold life insurance policies, and how it can interact with other estate planning documents such as revocable living trusts, pour-over wills, and powers of attorney. The Law Offices of Robert P. Bergman provides clear guidance on the legal and practical considerations for creating and funding an ILIT that aligns with your personal and family goals while addressing tax and probate planning concerns in California.
Deciding to establish an ILIT involves key choices about ownership, beneficiaries, trustees, and how policy premiums will be paid. This introduction outlines the primary issues you should consider, including potential estate tax implications, creditor protection, and the importance of proper administration. We discuss related documents you may already have or might need, such as a certification of trust, general assignment of assets to trust, HIPAA authorization, and guardianship nominations for minor children. Our goal is to help Lompoc families make informed decisions that preserve wealth and protect loved ones over the long term.
An ILIT can offer meaningful benefits by removing life insurance proceeds from a taxable estate and providing a structured way to distribute funds to beneficiaries according to your wishes. Beyond tax considerations, an ILIT can ensure that life insurance proceeds are managed responsibly, protecting inheritances from probate delays and certain creditor claims. For families with minor children, blended families, or beneficiaries with special needs, this trust can be drafted to provide controlled distributions and oversight. Understanding how an ILIT coordinates with existing trusts, wills, and beneficiary designations is essential to achieving the intended results without unintended consequences.
The Law Offices of Robert P. Bergman serves clients in Lompoc and throughout Santa Barbara County with a focus on practical estate planning strategies. Our attorney helps clients draft tailored trusts and related documents such as irrevocable life insurance trusts, revocable living trusts, pour-over wills, and powers of attorney. We take a collaborative approach, listening to family goals and providing clear explanations about the legal effects of different choices. The firm emphasizes careful drafting and proactive administration to reduce the chance of disputes and to help ensure that a person’s intentions are honored after they pass away.
An ILIT is a trust created to own and control one or more life insurance policies for the benefit of designated beneficiaries. Once the trust is established and the policy is transferred into it, the grantor typically relinquishes ownership and certain rights associated with the policy. This transfer is designed to remove the policy proceeds from the grantor’s taxable estate, subject to timing and other rules, and to allow the trustee to manage distributions according to the trust provisions. Proper funding, documentation, and coordination with beneficiary designations are essential to ensure the trust operates as intended under California law.
The administration of an ILIT involves ongoing tasks such as paying premiums, maintaining trust records, and making distributions in accordance with the trust terms. Decisions about who will serve as trustee, how premiums will be funded, and what distribution standards to use will shape how resources are preserved and allocated. Funding options may include gifts to the trust to cover premiums or assigning ownership of an existing policy to the trust. Each choice carries legal and tax considerations, so careful planning is necessary to avoid unintended inclusion of the policy proceeds in the grantor’s estate or other negative consequences.
An Irrevocable Life Insurance Trust is a legal arrangement that holds life insurance policies outside of a person’s estate. The trust becomes the owner and beneficiary of the policy, and the trustee manages the proceeds for named beneficiaries after the insured’s death. Because the trust is irrevocable, the grantor generally gives up direct control over the policy and the trust assets. This structure can limit estate inclusion and provide a controlled means of distributing proceeds to heirs, paying estate expenses, or funding trust provisions such as a retirement plan trust or a special needs trust to protect long-term benefits for vulnerable beneficiaries.
Setting up an ILIT requires several coordinated steps, including drafting trust documents, selecting a trustee, establishing funding mechanisms for premiums, transferring or purchasing a policy within the trust, and documenting gifts used to pay premiums when applicable. The trustee must keep accurate records, provide notice to beneficiaries when required, and manage or distribute proceeds according to the trust’s instructions. It is also important to review beneficiary designations on related accounts and to consider complementary documents such as advance health care directives, financial powers of attorney, and pour-over wills to create a cohesive estate plan.
Familiarity with common terms helps clients make informed decisions about an ILIT. This glossary defines essential concepts such as grantor, trustee, beneficiary, a certification of trust, and common trust options like special needs trusts and pet trusts. Understanding these definitions clarifies how an ILIT interacts with other components of an estate plan and which documents are needed to support the trust’s administration. Clear terminology also assists in conversations with financial institutions, insurance carriers, and family members who will be involved in implementing and carrying out the trust provisions.
An ILIT is a trust that owns life insurance policies and receives policy proceeds upon the insured’s death. The grantor places a life insurance policy into the trust or has the trust purchase the policy, and the trustee manages the policy and eventual proceeds for beneficiaries. The irrevocable nature means the grantor typically cannot change the trust terms or reclaim policy ownership without potential tax consequences. The trust document describes how proceeds are distributed, whether payments are timed, and any protections for beneficiaries against creditors or mismanagement. An ILIT is often paired with other estate planning documents for a complete plan.
The trustee is the person or entity charged with managing the ILIT according to the trust terms. Responsibilities include holding and administering trust assets, paying premiums when funds are available, keeping accurate accounting and trust records, and distributing proceeds to beneficiaries as specified. Trustees must act in the best interests of beneficiaries and follow the trust’s directives. Choosing a trustee who can handle administrative duties and tax reporting is important, and many families select a trusted individual or a professional fiduciary to ensure consistent, impartial management of trust affairs over time.
The grantor is the person who creates the ILIT and transfers the policy into the trust. Beneficiaries are the individuals or entities designated to receive benefits from the trust when the insured dies. Clear identification of beneficiaries and backup recipients is essential to avoid disputes and to achieve intended distributions. The trust may include provisions for income distributions, principal distributions, or specific payouts for education, healthcare, or other needs. Coordination with beneficiary designations on the insurance policy and retirement accounts is necessary to prevent conflicts and unintended estate inclusion.
Funding an ILIT commonly involves annual gifts from the grantor to the trust to cover insurance premiums, or the grantor may transfer ownership of an existing policy into the trust. Gift tax considerations and the timing of transfers affect whether the proceeds remain outside the estate. Some trusts include provisions for a general assignment of assets to trust or a certification of trust to formalize ownership and administration. Proper documentation of gifts and premium payments helps support the intended estate tax treatment and ensures that the trust can continue paying premiums without interruption.
An ILIT differs from a revocable living trust in that it is intentionally irrevocable and designed specifically to hold life insurance outside the grantor’s estate. A revocable trust provides flexibility and control during life, while an ILIT focuses on post-death liquidity and distribution control for beneficiaries. For some families, simpler approaches such as beneficiary designations on policies or naming a trust as beneficiary without a separate ILIT may suffice. However, an ILIT offers distinct features for tax planning and controlled distributions. Evaluating the right approach depends on family structure, asset levels, and long-term goals.
If a life insurance policy is modest in value and beneficiaries are immediate family members with straightforward distribution needs, a formal ILIT may not be necessary. In such situations, updating policy beneficiary designations or coordinating with a revocable living trust could address estate planning goals without creating additional trust administration. Simpler arrangements can reduce paperwork and ongoing trust management responsibilities. Clients with limited assets or uncomplicated family structures often achieve their objectives through these less complex alternatives while maintaining clear documentation and beneficiary designations.
When a client already has sufficient liquid assets, or when estate administration can rely on existing savings and accounts for immediate needs, establishing a separate ILIT may add complexity without meaningful benefit. Families with readily available funds to pay taxes, debts, and administrative costs may prefer to keep insurance proceeds payable directly to beneficiaries or to a revocable trust. The decision should consider the administrative burden of trust management, potential gift and estate tax considerations, and the degree of control desired over the timing and manner of distributions to heirs.
A comprehensive approach that incorporates an ILIT alongside revocable trusts, pour-over wills, and specialized trusts is appropriate when sizable assets, blended families, or beneficiaries with special needs exist. In those circumstances, careful planning helps preserve wealth, maintain eligibility for public benefits where needed, and prevent unintended disinheritance or disputes. A coordinated plan addresses tax implications, ownership structures, and distribution mechanisms while clarifying fiduciary roles. Comprehensive planning can also ensure that retirement plan trusts, irreplaceable family assets, and life insurance proceeds work together to meet long-term family objectives.
When a grantor wants detailed control over how and when beneficiaries receive funds, and wishes to provide protection from creditors or poor financial decisions, a comprehensive trust arrangement can offer those protections. Combining an ILIT with trusts such as a special needs trust or a retirement plan trust allows families to establish clear distribution rules, define trustee authority, and tailor protections for beneficiaries. This approach involves ongoing administration and careful drafting, but it can deliver stable, predictable outcomes that align with a family’s long-term planning objectives.
A coordinated estate plan that includes an ILIT can provide multiple benefits, including improved tax planning, readiness to meet post-death obligations, and a clear framework for distributing life insurance proceeds. By aligning the ILIT with other documents such as wills, advance health care directives, and powers of attorney, families create redundancy that helps ensure their wishes are carried out. This approach also clarifies responsibilities for trustees and executors, reduces the risk of probate disputes, and enhances the likelihood that beneficiaries receive intended support without unnecessary delay.
In addition to tax and distribution benefits, a comprehensive plan supports continuity in financial affairs and decision making. Documents like a general assignment of assets to trust and certification of trust provide clear proof of ownership and authority to financial institutions, reducing friction during administration. Including provisions for unique needs, such as pet trusts or guardianship nominations, helps families address varied concerns in one cohesive plan. Careful integration of all components increases certainty and reduces the potential for legal complications at a time when families need clarity and stability.
One primary benefit of using an ILIT as part of a larger estate plan is the potential to keep life insurance proceeds outside of a taxable estate, subject to applicable laws and timing rules. This can reduce estate tax exposure and provide liquidity to cover taxes, debts, and administrative expenses without forcing the sale of assets. A thoughtfully structured plan can also decrease the role of probate for certain assets, allowing for a more private and efficient transfer of value to intended beneficiaries while maintaining orderly administration of the estate.
An ILIT combined with other trusts can protect beneficiaries from losing assets to creditors, divorce settlements, or poor financial decisions, depending on the structure chosen. Trust provisions can set standards for distributions, appoint successor trustees, and outline conditions for payouts such as education or health needs. For beneficiaries who require long-term oversight or who are receiving public benefits, trusts like special needs trusts can be coordinated to preserve eligibility. This layered approach helps families ensure that assets serve intended purposes across generations.
When planning an ILIT, clearly document how life insurance premiums will be paid to avoid unintended tax consequences or lapses in coverage. Common approaches include annual gifts to the trust timed with premium payments or assigning an existing policy to the trust and funding premiums through designated contributions. Keeping a record of gifts and using appropriate notice to beneficiaries when required helps maintain the intended trust treatment. Open communication with your trustee and financial institutions will reduce administrative surprises and help ensure continuous coverage for the duration of the policy.
Choose a trustee who is willing and able to manage ongoing duties such as paying premiums, maintaining records, and filing necessary tax information. Trustees should be comfortable handling administrative tasks or willing to hire assistance for bookkeeping and tax filings. Clear instructions and a robust trust document can reduce the burden on the trustee by specifying how funds should be handled, when distributions are permitted, and how successor trustees will be appointed. Proper selection and preparation help ensure the trust operates smoothly over the years between funding and the eventual distribution of proceeds.
Families in Lompoc often consider an ILIT to provide liquidity for paying estate costs, to remove life insurance proceeds from a taxable estate, and to ensure controlled distributions to heirs. An ILIT can be useful when real property, business interests, or retirement accounts might otherwise require sale or division to cover taxes and expenses. It can also be effective when there is a desire to provide for a surviving spouse while preserving separate inheritance for children from a prior marriage. Each family’s circumstances differ, so tailored planning helps match the trust structure to the intended objectives.
Beyond tax and liquidity reasons, an ILIT is often chosen to protect legacy intentions and simplify administration at a difficult time. The trust can specify how funds are to be used for education, healthcare, or long-term support, and it can reduce the risk of family disputes over immediate access to funds. For clients concerned about heirs’ financial maturity or creditor exposure, trust provisions can provide layers of protection. Combining the ILIT with other trusts and legal documents produces a clear roadmap for distributing assets according to carefully documented wishes.
Common circumstances that prompt consideration of an ILIT include high net worth estates, blended family considerations, concerns about probate delays, and the desire to provide for beneficiaries with special needs while preserving benefit eligibility. Business owners, property holders, and those with significant retirement account balances frequently evaluate ILITs to ensure liquidity and to plan for equitable distributions. Additionally, people who want to protect life insurance proceeds from certain creditors or to control distributions over time often include ILITs in a broader estate strategy tailored to their specific family dynamics.
When an estate includes significant illiquid assets such as real estate or business interests, an ILIT can provide the necessary liquidity to pay taxes and settlement costs without forcing the sale of important assets. The trust-owned life insurance proceeds can be used to bridge financial needs at the time of death, preserving the continuity of family businesses or the residence. Establishing an ILIT requires careful coordination with other estate planning documents to ensure timely funding and to avoid unintended estate inclusion due to timing of transfers or premium payments.
Blended families often have competing distribution goals, and an ILIT can provide a structured way to allocate life insurance proceeds fairly among different beneficiaries. The trust can specify portions for a surviving spouse, children from prior relationships, or grandchildren, and it can set conditions for distributions such as ages or educational milestones. Using an ILIT helps reduce confusion over immediate payouts and can protect inheritances intended for specific lines of the family, which is particularly helpful when maintaining separate property or legacy objectives is a top priority.
When a beneficiary relies on public benefits or has special needs, an ILIT used in concert with a special needs trust can preserve eligibility while still providing financial support. Careful drafting ensures that distributions do not adversely affect benefit eligibility, and the trust can direct funds for specific purposes such as medical care, education, or therapy. This planning requires thoughtful coordination among trustees, caregivers, and legal documents to provide for long-term wellbeing without jeopardizing critical public benefits.
The Law Offices of Robert P. Bergman provides estate planning assistance to residents of Lompoc and nearby communities in Santa Barbara County. We help clients evaluate whether an ILIT fits within their wider planning objectives and draft the necessary trust documents, beneficiary designations, and supporting paperwork. Our approach focuses on clear communication and practical steps to implement plans, including guidance on related documents such as revocable living trusts, pour-over wills, financial powers of attorney, and advance health care directives. We aim to make the process manageable and thorough for each family.
Clients come to our firm for patient guidance, careful document preparation, and a focus on delivering plans that match family values and practical needs. We work to explain options clearly for ILITs, revocable trusts, and related instruments so clients understand the tradeoffs involved in ownership, control, and tax planning. Our goal is to craft durable documents that reduce uncertainty and make administration straightforward for trustees and loved ones. We emphasize transparency about costs and timelines so clients know what to expect at each stage of the planning process.
The firm assists with the full lifecycle of trust-related work, from drafting ILIT documents and coordinating insurance transfers to preparing certifications of trust and supporting documents for financial institutions. We also advise on how the ILIT integrates with powers of attorney, advance health care directives, and guardianship nominations where appropriate. Our focus is on practical solutions that endure, including support for successor trustees and help with trust modification petitions or Heggstad petitions when circumstances change and legal adjustments are needed.
When clients need a cohesive estate plan, we provide options that address tax planning, probate avoidance, and beneficiary protection while minimizing administrative friction. We help clients identify appropriate trustees, document funding strategies for premiums, and ensure that beneficiary designations are aligned with trust provisions. For those considering more advanced trusts such as irrevocable life insurance trusts, special needs trusts, or retirement plan trusts, we offer clear explanations and step-by-step implementation guidance to help families protect their legacy and provide for their loved ones in a deliberate way.
Our process begins with a thorough information gathering session to understand family dynamics, asset composition, and planning goals. From there we draft trust documents tailored to those objectives, coordinate any necessary insurance transfers, and prepare the supporting paperwork such as certifications of trust and assignment forms. We also help implement funding strategies for premiums and review beneficiary designations to ensure consistency. Finally, we provide guidance on trustee responsibilities and ongoing administration so the trust functions smoothly over time and benefits reach the intended recipients.
The first step is a detailed consultation where we review your current estate planning documents, life insurance policies, and family priorities. We identify whether an ILIT is appropriate, discuss options for funding premiums, and evaluate how the trust will interact with your revocable living trust, wills, and other instruments. This phase includes collecting policy information, asset lists, and beneficiary designations so we can draft a trust that accurately reflects your wishes and avoids conflicts with existing arrangements or unintended tax consequences under California law.
We examine existing estate planning documents, insurance policies, and retirement account beneficiary designations to identify inconsistencies and to develop a coherent plan. This review allows us to recommend whether transferring ownership of a current policy into a trust or having the trust purchase a new policy would better serve your goals. Attention to timing, gift documentation, and premium funding mechanisms is included, as these factors influence whether the policy remains outside the taxable estate and whether the trust will achieve its intended purposes for beneficiaries.
We talk through who will serve as trustee and how premiums will be paid. Options include gifting funds to the trust annually to cover premiums, having family members assist with premium payments, or structuring other arrangements consistent with your overall plan. Selecting a trustee capable of record-keeping and administration is important, and we discuss the possibility of appointing an individual, a corporate trustee, or a trusted family member who is comfortable with the responsibilities. Clear instructions in the trust help reduce administrative burdens later.
Once decisions are made, we prepare the ILIT documents and related forms such as a certification of trust and assignment documents if transferring an existing policy. We ensure the trust language reflects funding strategies, distribution terms, trustee powers, and any provisions for beneficiaries with special needs. After reviewing the documents with you, we assist with execution formalities and help coordinate with the insurance company to complete transfer of ownership or beneficiary designation changes. Proper documentation at this stage supports the trust’s intended tax and probate treatment.
We liaise with insurance companies and financial institutions to confirm the trust meets carrier requirements for ownership and beneficiary designations. This coordination includes providing the certification of trust and any required forms so the transfer or issuance can proceed without delays. Maintaining close communication with carriers ensures policy terms remain in effect and that premium payments are applied correctly. This reduces the chance of administrative errors that could impact the trust’s tax or estate treatment and helps protect the policy for the benefit of beneficiaries.
After execution, we verify that ownership transfers have been recorded and that the trust is properly funded according to your chosen method. This includes confirming that gifts used to pay premiums are documented and that any required notices are provided. We also review how the ILIT fits with your broader estate plan, updating related documents such as pour-over wills or powers of attorney as needed. This final check helps ensure the plan functions as intended and reduces the likelihood of surprises during administration.
An ILIT requires periodic attention to maintain coverage, account for premium payments, and keep trust records current. We provide guidance on trustee duties, assist with annual accounting or tax filings when necessary, and help with any modifications that may be appropriate given changed circumstances. Periodic reviews of beneficiary designations, policy performance, and family circumstances allow for adjustments to the broader estate plan. Ongoing oversight helps protect the integrity of the trust and ensures beneficiaries receive the intended benefits when the policy pays out.
We assist trustees by explaining record-keeping requirements, options for professional assistance with accounting, and steps for maintaining clear documentation of premium payments and trust activity. Proper records help substantiate the trust’s operation and can be important if questions arise about funding or distributions. We can provide templates for annual accounting and guidance on communicating with beneficiaries at appropriate times. This support helps trustees fulfill their obligations confidently and reduces friction during later trust administration.
Life events such as marriage, divorce, births, or changes in financial circumstances may prompt reconsideration of an estate plan. While an ILIT is irrevocable, other parts of your estate plan can be updated to reflect new priorities. When necessary, we help explore options such as trust modification petitions or other legal steps to adjust related planning documents consistent with applicable law. Regular reviews ensure that the overall estate plan remains aligned with current goals and preserves intended benefits for beneficiaries over time.
An Irrevocable Life Insurance Trust is a legal arrangement created to own and control life insurance policies outside of an individual’s estate. The trust becomes both owner and beneficiary of the policy, and a trustee manages the policy and eventual proceeds according to the trust document. This contrasts with revocable trusts, where the grantor retains control and can amend the document during life. An ILIT is intended to provide structured management and distribution of proceeds and may offer different estate and tax treatment than other trusts. Creating an ILIT requires careful attention to draft language, trustee powers, and funding arrangements. Because the trust is generally irrevocable, the grantor gives up certain ownership rights to achieve the intended post-death outcomes. The trust document should specify who receives distributions and under what conditions, and it should work in coordination with beneficiary designations, powers of attorney, and other estate planning documents to ensure consistency and clear administration.
Transferring a life insurance policy into an ILIT can have tax implications, but these depend on timing and how the transfer is structured. If ownership is transferred and the insured dies within a short period after the transfer, the proceeds might still be included in the estate under applicable rules. Proper planning, including timing of transfers and documentation of gifts used to pay premiums, helps manage these risks. Gift tax rules may apply to contributions used to fund premiums, so coordinating transfers with broader estate planning goals is important. Working with your attorney to document gifts and to follow carrier requirements for ownership changes reduces the chance of unintended tax outcomes. Clear records showing annual gifts for premiums and consistency between policy ownership and trust documentation support the intended estate planning results. When in doubt, timing considerations and careful implementation can make a significant difference.
Premiums for a policy owned by an ILIT are typically paid from trust funds, which the grantor can provide through annual gifts or other funding arrangements. One common method is for the grantor to make gifts to the trust timed with premium payment schedules, with the trustee using those funds to pay the insurer. Accurate documentation of gifts and payments is important to support the trust’s tax treatment and to make sure premiums are paid on time to avoid policy lapse. Alternatives include transferring an existing paid-up policy into the trust or structuring family contributions in ways that are consistent with the trust terms. Clear instructions in the trust about how premiums should be handled and who is responsible for funding help reduce administrative confusion and protect the policy’s continued effectiveness for the beneficiaries.
Selecting a trustee for an ILIT requires balancing trustworthiness, administrative ability, and continuity. A trustee should be comfortable managing financial matters, keeping accurate records, and following the terms of the trust. Many clients choose a trusted family member, a close friend, or a professional fiduciary who can manage ongoing administration without conflict. The trust can provide guidance on successor trustees to ensure continuity if the original trustee becomes unable or unwilling to serve. Providing clear trustee instructions and, when appropriate, offering trustee compensation or professional support helps ensure obligations like premium payments, tax filings, and beneficiary communications are handled responsibly. The trustee role involves practical tasks that benefit from forethought and preparation.
An ILIT can be coordinated with a special needs trust to provide financial support to a beneficiary who receives public benefits without jeopardizing eligibility. The ILIT can direct life insurance proceeds into a separate trust vehicle designed to preserve benefit eligibility and to cover needs not met by public programs, such as supplemental care, education, or therapeutic services. Proper drafting is required to ensure distributions do not count as income for benefit purposes and that the receiving trust meets legal requirements for preserving benefits. Working with counsel to align trust language and distribution rules helps protect the beneficiary’s long-term interests. This careful planning reduces the risk that support designed to assist a vulnerable beneficiary will inadvertently cause the loss of critical public resources.
If a policy owned by an ILIT lapses, the trust will no longer hold the intended insurance asset, and the expected proceeds will not be available for beneficiaries. Preventing lapses starts with clear funding plans and consistent premium payments. Trustees should maintain regular communication with policy carriers, track payment schedules, and keep records of incoming gifts used for premiums. Periodic reviews ensure the trust has sufficient funds and that premiums remain affordable relative to the family’s goals. If a lapse does occur, options may include trying to reinstate the policy within the carrier’s rules or exploring alternate funding strategies, though reinstatement may have limits and conditions. Prompt attention to policy status helps preserve the planned benefits for heirs.
An ILIT should be coordinated with existing revocable living trusts and wills to provide a cohesive estate plan. While a revocable living trust handles assets you control during life and can be amended, an ILIT focuses specifically on life insurance and is generally irrevocable. Ensuring beneficiary designations and trust provisions do not conflict helps avoid disputes or unintended outcomes. A pour-over will can be used as part of the overall plan to move certain assets into a revocable trust at death, while the ILIT governs insurance proceeds according to its own terms. Reviewing all documents together allows for consistent language and aligned objectives, reducing confusion for trustees and executors. Periodic reviews ensure changes in family circumstances are reflected across all estate planning instruments.
Timing is important when transferring a policy to an ILIT because transfers made shortly before the insured’s death can be subject to rules that bring the policy proceeds back into the estate for tax purposes. Generally, allowing sufficient time between transfer and death helps support the desired estate treatment, and documenting any gifts used to pay premiums is essential. The exact timing and implications depend on current tax rules and the nature of the transfer, so planning ahead reduces the risk of unintended outcomes. Discussing timing and funding with your attorney and insurance carrier before transferring ownership helps ensure the transfer achieves the intended objectives. Proper documentation and careful implementation are key components of effective planning.
Because an ILIT is typically irrevocable, changing beneficiaries after the trust is created may be difficult or impossible unless the trust document includes reserved powers or conditions that allow modifications. In some situations, trust modification petitions or court approval may be needed to alter terms. That is why careful initial drafting that anticipates future changes and designates successor beneficiaries can provide needed flexibility while maintaining the trust’s primary purposes. If your circumstances change after establishing an ILIT, consult with counsel to evaluate potential legal options. Depending on the facts, there may be lawful methods to update planning consistent with current objectives while respecting the trust’s irrevocable structure.
Costs to set up and administer an ILIT vary based on the complexity of the trust, the number of related documents, and whether ongoing trustee or professional services are used. Initial drafting fees typically cover the trust document, certification of trust, and coordination with insurance carriers. Additional costs may arise for transfers of policies, carrier fees, or specialized trust vehicles such as special needs trusts. Ongoing administrative costs depend on trustee duties, whether a professional trustee is engaged, and any required accounting or tax filings. During the planning process, we provide transparent estimates and help clients weigh the benefits against the costs. Understanding expected fees and administrative responsibilities upfront helps families decide whether an ILIT aligns with their overall planning goals and budget.
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