An Irrevocable Life Insurance Trust (ILIT) can be a powerful component of an estate plan for those in Gilroy and throughout Santa Clara County who wish to manage life insurance proceeds outside of their taxable estate. This trust arrangement allows a person to transfer a life insurance policy or the proceeds of a policy into a trust that cannot be altered by the grantor once established. Clients often pursue an ILIT to provide liquidity to pay estate expenses, support beneficiaries, or preserve assets for future generations. Understanding the fundamentals, benefits, and practical steps involved is important when considering this planning strategy.
Deciding whether an ILIT fits your estate plan requires an assessment of current assets, family circumstances, and long-term goals. An ILIT is typically used alongside other estate planning documents such as a revocable living trust, pour-over will, powers of attorney, and healthcare directives. It is particularly useful when life insurance proceeds might otherwise be subject to estate taxes or when the policy owner wants to control how proceeds are used. Reliable planning helps ensure that funds are available where and when they are needed, while also protecting beneficiaries and minimizing administrative burdens after a death.
Creating an ILIT can offer several benefits that address both financial and family planning objectives. By placing a life insurance policy into an irrevocable trust, the policy proceeds can be positioned to avoid inclusion in the grantor’s estate for tax purposes, which may reduce estate tax exposure for larger estates. An ILIT can also provide structured distributions to beneficiaries, protect proceeds from creditor claims, and preserve benefits for minor children or beneficiaries with special needs when paired with appropriate trust provisions. Carefully drafted ILIT provisions help ensure that proceeds are used as intended and that administrative matters are handled smoothly after the grantor’s passing.
The Law Offices of Robert P. Bergman serve families across Santa Clara County with a focus on practical, client-centered estate planning solutions, including irrevocable life insurance trusts. The firm assists clients in designing plans that combine trusts, wills, powers of attorney, and health care directives to address financial, tax, and family considerations. Our approach emphasizes clear communication, careful document drafting, and ongoing support to adapt plans as client needs evolve. We work closely with clients to explain how an ILIT interacts with other estate planning tools and to coordinate implementation that reflects each client’s specific priorities and circumstances.
An irrevocable life insurance trust is formed when the grantor creates a trust document and either transfers ownership of an existing life insurance policy into the trust or arranges for new coverage owned by the trust. Once the trust owns the policy, the trust is the policyholder and the trust document directs how proceeds will be handled. Because the grantor gives up ownership and control over the policy, the policy proceeds are generally not included in the grantor’s taxable estate, provided the trust and transfer comply with tax and technical requirements. Proper setup and funding are essential to achieve the intended estate tax and beneficiary protection outcomes.
Key considerations when setting up an ILIT include the trust’s terms for managing premium payments, naming trustees and beneficiaries, and determining distribution schedules. The grantor may make annual gifts to the trust to cover premiums, often using gift tax exclusions to minimize tax reporting. If the grantor retains certain powers or ownership rights after the transfer, the policy might still be included in the estate, so careful drafting and adherence to transfer timing rules are necessary. Coordination with financial and insurance advisors helps ensure premiums can be paid and the trust remains funded according to the grantor’s plan.
An ILIT is a trust that owns a life insurance policy and is structured so the grantor cannot unilaterally change or revoke the trust. The trust document names a trustee to manage the policy and directs how the proceeds are distributed when the insured dies. Common features include provisions for premium funding, distribution timing for beneficiaries, and trust powers that help trustees administer proceeds for specific purposes such as education, debt repayment, or support. The ILIT’s irrevocable nature is what typically keeps the policy proceeds from being treated as part of the grantor’s estate, but satisfying legal and tax rules is essential to preserve that result.
Setting up an ILIT involves drafting the trust instrument, selecting a trustee, transferring or applying for the life insurance policy in the trust’s name, and establishing a plan for premium payments. The grantor may make annual gifts to the trust to fund premiums, which can use annual gift tax exclusion amounts to limit reporting. Trustees must manage the policy, maintain records, and make distributions according to the trust terms. Additionally, timing rules, such as the three-year lookback for transfers made before death, must be considered because transfers within that period can affect estate inclusion. Coordination among legal, insurance, and financial professionals helps prevent common pitfalls.
Understanding common terms helps demystify the ILIT process and supports clear communication with advisors. Terms include grantor, trustee, beneficiary, premium funding, gift tax exclusion, and estate inclusion rules. Each term has implications for tax treatment, administration, and long-term control of assets. Taking the time to review definitions and asking questions about how each concept applies to your situation can help you make informed choices. Clear documentation and straightforward trust provisions reduce the likelihood of disputes and make it easier for trustees to carry out your wishes after your death.
The grantor is the person who creates the trust and transfers assets or policy ownership into it. When establishing an ILIT, the grantor gives the trust ownership of a life insurance policy and typically funds premium payments indirectly through gifts to the trust. Because the grantor relinquishes ownership and certain powers over the policy, the trust is intended to operate independently. The grantor should understand the implications of making the trust irrevocable, including the loss of direct control over the policy and how that decision affects estate planning and tax considerations over time.
The trustee manages the trust’s assets, which for an ILIT typically includes the life insurance policy and any funds used to pay premiums. The trustee has fiduciary duties to administer the trust according to its terms and in the best interests of the beneficiaries. Responsibilities may include paying premiums, maintaining records, filing necessary tax returns for the trust, and distributing proceeds pursuant to the trust provisions. Choosing a trustee who understands administrative responsibilities and who can remain impartial when making distribution decisions is an important part of drafting an effective ILIT.
A beneficiary is a person or entity entitled to receive trust distributions as specified in the ILIT document. Beneficiaries can include family members, charitable organizations, or other designated recipients. The trust may direct payments for specific purposes such as education or health needs, or it may allow discretionary distributions for support. Proper beneficiary designation within the trust and coordination with other estate planning documents is important to prevent conflicts and ensure that proceeds are distributed according to the grantor’s intentions when the insured person passes away.
When a grantor makes gifts to an ILIT to pay premiums, those contributions may qualify for annual gift tax exclusion amounts if structured correctly. The trustee often issues Crummey notices to beneficiaries to allow short-term withdrawal rights, preserving the exclusion for annual gifts. While gift tax rules can be complex, consistent funding and documentation help ensure premiums are covered and tax reporting obligations are met. Planning for premium funding includes assessing the grantor’s cash flow, potential use of other assets, and communication with beneficiaries about their limited withdrawal rights under the trust.
An ILIT is one of several tools available to manage life insurance and estate tax exposure. A revocable living trust offers flexibility and control during a grantor’s life but does not remove assets from the estate for tax purposes. A pour-over will coordinates with a revocable trust but does not address life insurance ownership directly. Life insurance policies owned personally may be simpler to manage but can be subject to estate inclusion. Choosing among options depends on priorities such as tax planning, asset protection, control over distributions, and the complexity the grantor is willing to accept in administration and ongoing funding.
If an individual’s total estate falls well below applicable federal and state estate tax thresholds, owning life insurance personally or coordinating coverage through a revocable trust may be sufficient. In such situations, the cost and administrative complexity of setting up and maintaining an ILIT may outweigh the tax planning benefits. Simpler arrangements can still provide liquidity for final expenses and immediate family needs while keeping document portfolios straightforward. Decisions should reflect current asset levels, projected growth, and family goals, with periodic reviews to determine whether a more robust trust structure becomes necessary over time.
Some individuals prioritize maintaining direct control over their life insurance policy, including the ability to change beneficiaries, modify coverage, or surrender the policy if circumstances change. A revocable trust or personal ownership allows for that flexibility. If minimizing administrative duties and preserving control during the owner’s lifetime are primary concerns, and potential estate tax consequences are not a pressing issue, a less permanent arrangement may be preferable. It remains important to factor in how proceeds will be handled at death and whether beneficiaries will be adequately protected under a simpler plan.
For individuals with larger estates, multiple assets, or complex family situations, a comprehensive approach helps integrate an ILIT with other planning tools to address tax liabilities, liquidity needs, and beneficiary protections. A coordinated plan ensures that life insurance proceeds work in concert with trusts, wills, and retirement accounts, avoiding unintended estate inclusion or conflicts among documents. Thorough planning includes attention to funding strategies, trustee selection, and timing considerations that are critical to achieving the desired tax and distribution results while minimizing administrative burdens for beneficiaries after the grantor’s death.
When beneficiaries include minors, individuals with special needs, or family members who may benefit from structured distributions, an ILIT provides a reliable mechanism to manage proceeds over time. A comprehensive planning strategy coordinates the ILIT with other trust provisions to ensure that funds are distributed responsibly, protecting benefits and preserving assets for long-term needs. This approach also addresses contingencies, successor trustee appointments, and trust administration policies that reduce disputes and ensure that the grantor’s intentions are implemented consistently and compassionately for the family’s benefit.
A comprehensive approach to estate planning that includes an ILIT helps align insurance planning with broader goals such as tax mitigation, asset protection, and orderly distribution of assets. Integrating the ILIT with a revocable living trust, durable powers of attorney, and healthcare directives reduces the chance of conflicting instructions and simplifies administration. It also enables crafted distributions that meet the needs of beneficiaries while minimizing estate taxes when applicable. Regular review and updates ensure documents remain effective as laws and personal circumstances change over time.
Beyond tax considerations, a well-designed ILIT combined with a comprehensive plan can reduce stress for loved ones by providing clear instructions and a reliable source of funds for final expenses, debts, or ongoing support. The trust structure can incorporate safeguards against creditor claims and provide oversight when beneficiaries are young, have limited financial experience, or receive government benefits. Proper coordination and recordkeeping also streamline trustee duties, helping ensure that distributions happen quickly and in accordance with the grantor’s intentions.
One significant advantage of placing life insurance in an ILIT is the potential removal of policy proceeds from the taxable estate, which can reduce estate tax exposure for larger estates. This arrangement also provides liquidity to pay taxes, debts, and final expenses without requiring the sale of illiquid assets. By ensuring that funds are available to cover immediate financial needs, an ILIT helps safeguard family-owned businesses, real estate, and investment portfolios from forced liquidation, thereby preserving long-term wealth and continuity for beneficiaries.
An ILIT allows the grantor to specify how and when life insurance proceeds are paid, offering protections for beneficiaries who may be minors, have special needs, or face creditor claims. Trust provisions can allocate funds for education, healthcare, or periodic support, and may appoint successor trustees to manage distributions. These features help ensure that proceeds are used in line with the grantor’s intentions, reducing the likelihood of family disputes and providing a long-term safety net that responds to changing family circumstances while maintaining the grantor’s goals for asset stewardship.
Confirming a reliable plan for premium funding before establishing an ILIT prevents lapses in coverage and avoids administrative complications for trustees. Many grantors use annual gift contributions to the trust to cover premiums, often relying on annual gift tax exclusion rules to minimize reporting. Another option is to consider funding the trust with other liquid assets earmarked for premiums. Whatever approach is chosen, clear instructions and realistic cash flow planning minimize the risk of missed payments and protect the policy’s effectiveness for its intended estate planning purpose.
Coordination between legal, insurance, and financial advisors helps ensure the ILIT functions as intended. Insurance professionals can advise on whether to transfer an existing policy or have the trust own a new policy, while financial advisors can evaluate premium affordability and long-term funding. Legal counsel ensures trust language aligns with tax and estate planning objectives and complies with California law. This collaborative approach reduces surprises, clarifies roles, and helps create a cohesive plan that supports family needs and tax strategies over time.
People consider an ILIT when they want to protect life insurance proceeds from estate inclusion, provide structured distributions to beneficiaries, and ensure liquidity to cover taxes and final expenses. It is also commonly used to safeguard inherited funds for minors or individuals who need managed support. Those with significant assets or business interests may use an ILIT to preserve family wealth and minimize the need to liquidate business holdings. Ultimately, the decision to establish an ILIT depends on family circumstances, tax exposure, and long-term goals for asset preservation and beneficiary support.
An ILIT can also be appropriate for individuals who want to separate ownership of life insurance from other estate assets to minimize creditor exposure or to maintain confidentiality around distribution details. The trust structure creates a controlled environment for life insurance proceeds, allowing the grantor to tailor distribution terms for specific purposes such as educational expenses or long-term care funding. A carefully designed ILIT reduces uncertainty for beneficiaries and provides a framework for trustees to carry out the grantor’s wishes without court involvement, which often shortens resolution time and reduces administrative burdens.
Typical circumstances that lead people to consider an ILIT include having a sizable life insurance policy that could push an estate into higher tax brackets, owning a business or real estate that could be complicated to liquidate, or wanting to provide long-term financial stability for dependents. Families with special needs beneficiaries or blended family concerns often use ILITs to ensure proceeds are distributed according to the grantor’s plan. The ILIT can also address concerns about creditor claims, providing a more controlled environment for life insurance benefits to support intended recipients.
When life insurance proceeds are substantial relative to the rest of an estate, there is a potential for increased estate tax liability. An ILIT can be structured to own the policy and remove the proceeds from the grantor’s taxable estate, helping to reduce potential tax exposure. This strategy is commonly considered as part of broader estate tax planning for families and business owners. Proper timing, documentation, and premium funding are essential to ensure the intended tax treatment is preserved and the trust functions as planned when the insured person dies.
Families with young children, beneficiaries with limited capacity, or people who receive public benefits often need a plan to manage how life insurance proceeds are used. An ILIT can provide structured distributions, limit access to lump-sum payouts, and appoint trustees to manage funds for necessities like education, housing, and long-term care. These controlled distributions protect beneficiaries from receiving funds prematurely and can prevent disruptions to government benefits. Tailoring trust provisions to the family’s needs helps ensure that proceeds are used responsibly and for intended purposes.
Business owners sometimes use ILITs to provide liquidity for succession planning, buy-sell agreements, or to pay estate-related expenses without having to sell business interests. When a life insurance trust funds a buyout or supports the business through a transition, it provides certainty for business continuity and helps ensure that family members or co-owners are in a stable position to manage or transfer ownership. Careful coordination with business planning and tax professionals helps align the ILIT’s terms with business goals and financial realities.
We provide personalized guidance to residents of Gilroy, Santa Clara County, and neighboring communities who are exploring irrevocable life insurance trusts as part of their estate plans. Our services include assessing whether an ILIT aligns with your goals, drafting trust documents, coordinating transfers or policy ownership changes, and advising on premium funding strategies. We also help integrate the ILIT with revocable trusts, wills, powers of attorney, and healthcare directives to create a cohesive plan tailored to your family and financial situation. Ongoing reviews keep plans current as circumstances change.
Clients benefit from a practical, client-first approach focused on clear communication and thorough planning. We assist with the technical and administrative aspects of establishing an ILIT, explain the tax and timing considerations that affect estate inclusion, and coordinate with insurance and financial advisors to implement a workable premium funding plan. Our aim is to provide straightforward guidance so clients understand how the trust will function and what to expect during administration.
We tailor documents to reflect each family’s goals and priorities, ensuring trust provisions address specific concerns like beneficiary support, creditor protection, and distribution timing. Our drafting approach emphasizes clarity and practical administration, which reduces confusion for trustees and beneficiaries during a difficult time. Regular plan reviews and updates help maintain effectiveness as laws and family circumstances evolve, providing long-term value and reassurance that the plan remains aligned with current needs.
Clients receive support throughout the process, from initial planning and trust formation to coordination of insurance transfers and ongoing administration advice. We prioritize transparent communication and careful recordkeeping to make trustee duties manageable and to preserve the intended benefits of the ILIT. The result is a cohesive estate plan that addresses taxes, liquidity needs, and family protection goals while minimizing unnecessary complexity and administrative burdens for loved ones.
Our process begins with a thorough review of your financial situation, existing estate planning documents, and insurance policies to determine whether an ILIT aligns with your objectives. We then draft a trust tailored to your needs, assist with policy ownership transfers or new policy issuance in the trust’s name, and establish a premium funding plan. We explain timing rules and gift tax implications, prepare any necessary notices, and provide guidance to trustees to ensure smooth administration. Ongoing communication keeps clients informed and confident that their plan will operate as intended.
During the first stage, we gather details about assets, beneficiaries, existing estate documents, and life insurance policies. We discuss short- and long-term goals, family dynamics, and potential tax concerns to determine whether an ILIT is a suitable component of the estate plan. This step includes reviewing policy ownership, evaluating premium affordability, and identifying any special considerations that may affect trust terms. The goal is to create a clear plan that aligns with your priorities and prepares for efficient implementation if you decide to proceed.
We examine any current estate planning documents, beneficiary designations, and life insurance policies to identify conflicts or opportunities for consolidation. This review helps determine whether transferring a policy into a trust is feasible and whether beneficiary designations need to be revisited. It also reveals potential coordination issues with retirement accounts and other estate assets. By understanding the full picture, we can recommend an integrated plan that reduces the risk of unintended tax consequences or beneficiary disputes.
An essential part of forming an ILIT is ensuring the trust will have reliable funds to pay policy premiums. We work with clients and their financial advisors to evaluate cash flow, potential gift funding strategies, and whether other assets should be reserved for premium payments. Proper planning at this stage minimizes the risk of coverage lapses and protects the trust’s purpose. Clear written instructions and realistic funding mechanisms contribute to long-term success and ease of administration for trustees.
Once the plan is agreed upon, we prepare the trust document tailored to the client’s goals, including terms for trustee powers, beneficiary distributions, and premium funding. We coordinate with the life insurance company to transfer ownership or to issue a new policy in the trust’s name, ensuring that paperwork is handled correctly to avoid unintended estate inclusion. We also prepare any notices or gift documentation needed to preserve tax treatment. Detailed drafting and coordination at this stage set the foundation for smooth administration and intended tax results.
Drafting the trust involves specifying trustee powers, distribution standards, successor trustee appointments, and provisions for trust termination or modification scenarios. Language is drafted to reflect the grantor’s priorities while providing practical guidance for day-to-day administration. Special provisions may address education funds, healthcare needs, and protections for beneficiaries who might be vulnerable to creditors or poor financial decisions. Clear drafting reduces ambiguity, making it easier for trustees to carry out the grantor’s intentions when the time comes.
We coordinate directly with insurance carriers to accomplish ownership transfers or new policy issuances in the trust’s name, taking care to follow the carrier’s procedures and complete forms accurately. Accurate documentation helps avoid administrative delays and ensures the trust becomes the legal owner of the policy. We also verify policy terms, beneficiaries listed in the trust, and any required consents. Proper coordination with the insurance company reduces the risk of unintended estate inclusion and preserves the trust’s intended benefits.
After the trust owns the policy, ongoing administration includes funding premiums, maintaining records, issuing any required beneficiary notices, and preparing trust tax filings as necessary. Trustees should keep clear books and communicate with beneficiaries about the trust’s purpose and limitations. Periodic plan reviews help ensure the ILIT remains aligned with changes in law, financial circumstances, and family dynamics. We provide guidance on trustee responsibilities and offer support for administrative tasks to help the trust operate effectively over the long term.
Trustees must maintain accurate records of premium payments, gifts made to the trust, trust receipts, and any distributions. Proper recordkeeping supports compliance with tax reporting and helps beneficiaries understand trust activities. Trustees should also monitor policy performance and ensure coverage is maintained according to the grantor’s intentions. Clear instructions and accessible records reduce misunderstandings and simplify administration when distributions are required, helping the trust to function as a reliable resource for beneficiaries.
Regular reviews of the ILIT and overall estate plan allow the grantor and trustees to address changes in financial circumstances, family composition, or legal rules. While the trust is irrevocable, related planning documents and funding strategies may need updates to reflect new realities. Periodic check-ins help ensure premium funding remains viable and that the trust’s terms still match the grantor’s goals. Planning ahead for contingencies and revisiting beneficiary needs reduces surprises and helps preserve the trust’s intended benefits over time.
An Irrevocable Life Insurance Trust is a trust designed to own and control a life insurance policy so that policy proceeds are held and distributed according to the trust terms. Once a policy is placed in the trust, the trust becomes the owner and beneficiary as directed, and the grantor generally gives up direct control over the policy. The trust document names a trustee to manage the policy, handle premium funding, and make distributions to beneficiaries upon the insured’s death. The ILIT structure can accomplish goals like providing liquidity for estate expenses and creating controlled distributions for beneficiaries. Because the trust is irrevocable, it can keep proceeds separate from the grantor’s taxable estate if properly set up and timed. This requires careful coordination with tax rules and precise drafting to avoid unintended estate inclusion or administrative problems for trustees.
Transferring a life insurance policy to an ILIT can remove the policy proceeds from the grantor’s estate for tax purposes, but specific timing rules must be followed. If a policy is transferred and the insured dies within three years of the transfer, the proceeds may still be included in the grantor’s taxable estate under federal rules. Therefore, transfers should be planned well in advance of expected estate events to achieve the intended tax treatment. Additionally, retention of certain powers by the grantor can cause estate inclusion despite the trust’s irrevocable label. Proper drafting that ensures the grantor does not retain ownership rights and adherence to transfer timing rules are essential. Coordination with financial and insurance advisors helps confirm that the transfer achieves the expected tax outcome.
Premiums for an ILIT are typically funded by the grantor making gifts to the trust, often using the annual gift tax exclusion to minimize tax reporting. To qualify for the exclusion, trustees commonly provide beneficiaries with temporary withdrawal rights through Crummey notices, which notify beneficiaries of their present interest in the gift and preserve the exclusion. The trustee then manages the funds to pay premiums while beneficiaries generally do not exercise withdrawal rights. Crummey notices and proper documentation are important to support the gift tax treatment. Funding strategies should be realistic and sustainable to avoid coverage lapses. Planning includes assessing the grantor’s capacity to make annual gifts, whether to pre-fund premiums with other assets, and the tax implications of different funding approaches.
Choosing a trustee for an ILIT involves balancing trust administration competence, impartiality, and willingness to serve. Trustees handle premium payments, recordkeeping, and distributions, so the role requires attention to detail and a commitment to follow the trust’s terms. Some grantors appoint a trusted family member who understands the family’s needs, while others select a professional or corporate trustee to provide administrative continuity and neutrality in decision-making. When selecting a trustee, consider the complexity of the trust, the likelihood of conflicts among beneficiaries, and whether the trustee will need assistance from advisors. Naming successor trustees and clarifying trustee powers in the trust document helps ensure a smooth transition and consistent administration over time.
It is often possible to transfer an existing life insurance policy into an ILIT, but doing so requires coordination with the insurer and consideration of tax and coverage implications. Transferring an in-force policy can avoid the need for new underwriting but triggers the three-year rule that may affect estate inclusion if the insured dies soon after the transfer. In some cases, issuing a new policy owned by the trust provides a clearer path to achieving the desired tax treatment, but new policies require medical underwriting and acceptance by the insurer. The decision between transferring an existing policy and acquiring a new one depends on health status, policy terms, and timing considerations. A careful review of the policy, carrier procedures, and the grantor’s objectives helps identify the most appropriate route to secure coverage under the trust.
If an ILIT cannot pay premiums and a policy lapses, the intended benefits to beneficiaries may not be realized, which can have significant financial consequences at the time of the insured’s death. Trustees should monitor funding and explore alternatives such as using trust reserves, seeking additional gifts, or converting the policy if permitted by the carrier. Periodic reviews before a lapse occurs allow corrective action to protect coverage when possible. Planning for contingencies, including identifying successor payors or alternative funding arrangements, reduces the risk of unexpected policy termination. Clear trust provisions about handling lapses and communications with beneficiaries also help manage expectations and provide guidelines for trustee decisions in difficult situations.
An ILIT is typically one component of a broader estate plan and should be coordinated with revocable trusts, wills, powers of attorney, and healthcare directives. While a revocable living trust controls assets during the grantor’s life and may provide for distribution at death, it does not remove life insurance proceeds from the taxable estate unless ownership is assigned to an ILIT. Ensuring beneficiary designations, trust provisions, and will language do not conflict is essential to prevent unintended results. Coordination also involves beneficiary communication so that distributions from different sources are understood and managed in a cohesive way. Regular reviews of all estate planning documents ensure consistency and help avoid disputes among heirs while maintaining alignment with the grantor’s overall objectives.
When beneficiaries receive government benefits, such as Medi-Cal or SSI, outright receipt of life insurance proceeds can jeopardize eligibility. An ILIT can be structured to provide for such beneficiaries without disqualifying them from benefits, often by creating specific distribution terms or by coordinating with special needs planning tools. While an ILIT itself is not a substitute for a special needs trust, careful design can help preserve benefit eligibility while still providing support. Planning for benefit preservation requires careful drafting and coordination with advisors familiar with public benefit rules. Trustees must be aware of relevant limitations on distributions and act with sensitivity to the beneficiary’s ongoing needs, ensuring that support does not inadvertently terminate vital benefits.
An ILIT may have tax reporting obligations, including documentation of gifts to the trust and potential gift tax filings if annual exclusion amounts are exceeded. Trusts sometimes require separate tax identification and filings depending on the trust’s income and activities. Trustees should maintain accurate records of premium payments, gifts, and distributions to facilitate compliance with tax rules and to support any exclusions claimed. Consultation with a tax advisor helps clarify which filings are necessary and how best to document funding and trustee actions. Proper recordkeeping and timely filings reduce the risk of disputes with tax authorities and ensure the trust operates within applicable tax rules.
Regular review of an ILIT and the broader estate plan is advisable whenever there are significant life changes such as births, deaths, marriages, divorces, changes in asset levels, or major changes in tax law. Although the trust itself is irrevocable, revisiting funding strategies, trustee appointments, and related documents helps ensure the plan remains effective and aligned with current needs. Reviews also provide an opportunity to address practical administration issues and confirm that premium funding remains sustainable. Scheduling periodic check-ins every few years or following material changes in circumstances keeps the plan current and functional. Communication with financial and insurance professionals during reviews helps confirm that policies remain in force and that funding arrangements are sufficient to preserve the trust’s intended benefits.
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