An Irrevocable Life Insurance Trust (ILIT) is a planning tool many families use to manage life insurance proceeds outside of a taxable estate and to provide clear instructions for distribution to beneficiaries. At the Law Offices of Robert P. Bergman we assist clients in Hayfork, Trinity County and across California with the design and implementation of ILITs tailored to their family, financial and legacy goals. This page explains how an ILIT functions, the benefits it can provide, and the steps involved in creating and funding a trust. If you hold a significant life insurance policy or want greater control and protection for proceeds, an ILIT may be a sound option.
Setting up an ILIT involves legal, financial and administrative steps that must be coordinated carefully to achieve the intended results. Our approach focuses on clear drafting, proper transfers of policy ownership, and practical administration instructions so trustees and beneficiaries know what to expect. Whether you are in Hayfork, elsewhere in Trinity County, or connecting remotely, we will review your existing documents, discuss funding mechanisms, and explain how the trust will operate after the insured’s death. Contact the Law Offices of Robert P. Bergman at 408-528-2827 to discuss how a trust could fit into your estate planning goals and family circumstances.
An ILIT can provide significant benefits when it is properly drafted and funded. It generally removes life insurance proceeds from the insured’s estate, which can reduce or eliminate estate tax exposure and simplify settlement for heirs. The trust also allows the grantor to set conditions for distributions, protect proceeds from creditors or divorce claims in some circumstances, and manage how funds are used for minors or vulnerable beneficiaries. In addition, the ILIT can coordinate with other estate planning documents such as pour-over wills, revocable living trusts, and powers of attorney to create a cohesive plan that addresses liquidity, long-term care, and legacy objectives.
The Law Offices of Robert P. Bergman serves clients from San Jose through Trinity County, providing a full spectrum of estate planning services that include trusts, wills, powers of attorney, and related filings. Our firm focuses on practical, client-centered solutions that reflect each person’s financial situation and family needs. We assist with drafting documents such as revocable living trusts, pour-over wills, health care directives and the specific trust instruments and transfer documents necessary to implement an ILIT. Clients benefit from clear communication, thoughtful planning, and attention to the administrative steps that preserve the intended benefits of the trust.
An ILIT is created when the grantor executes a trust agreement that becomes irrevocable, transfers ownership or incidents of ownership in a life insurance policy to the trust, and designates the trust’s beneficiaries. Once ownership is transferred correctly, the life insurance proceeds will generally be payable to the trust and held under the trustee’s instructions for distribution. The trust document can define timing, conditions and purposes for distributions, such as education, healthcare, or staged payments. Properly implemented transfers and trustee funding decisions are essential to obtain the intended tax and creditor protections, and to ensure beneficiaries receive the policy proceeds as planned.
Creating an ILIT requires attention to timing and formality. There can be important rules around who owns the policy at the time of death and whether gifts to the trust require annual gifting or Crummey withdrawal notices to qualify for gift tax exclusions. The trustee’s duties include managing premium payments, keeping records, and coordinating with insurance companies and other advisors. While an ILIT can be beneficial for many households, each situation is unique: family structure, policy size, tax considerations, beneficiary needs, and existing estate planning documents all influence whether an ILIT is the right vehicle and how it should be structured.
An Irrevocable Life Insurance Trust is a legal arrangement that holds life insurance policies for the benefit of named beneficiaries according to the trust terms. The grantor transfers ownership of the policy to the trust, removing it from the grantor’s personal estate. The trustee, who may be a trusted family member, friend or professional fiduciary, manages the policy and administers proceeds after the insured’s death. The trust document outlines distribution rules, permissible uses of funds, and any conditions or protections for beneficiaries. Because ownership is transferred, an ILIT can change the tax and creditor implications that would otherwise attach to proceeds payable directly to a named individual.
Typical elements of an ILIT include the trust agreement, trustee appointment, beneficiary designations, and instructions for premium funding. The process often begins with a planning meeting to identify goals, then drafting the trust, transferring or issuing policies in the trust’s name, and documenting any gifts used to fund premiums. Trustees may need to provide the insurer with trust documentation, change ownership and beneficiary designations, and maintain records of premium payments and trust distributions. Coordination with financial advisors or insurers is important to ensure the change in ownership is effective and that the trust remains funded over time.
Understanding a few common terms can help you navigate the planning process with confidence. Important concepts include grantor, trustee, beneficiary, gift tax rules, income and estate tax consequences, funding and premium mechanics, and the difference between revocable versus irrevocable arrangements. Knowing how those pieces interact helps you evaluate tradeoffs between flexibility and protection. If you own a high-value policy or have particular concerns about taxes, creditor claims, or beneficiary needs, a clear grasp of these terms makes it easier to make informed choices about document language and trustee powers.
A revocable trust allows the person creating it to change its terms or dissolve it during their lifetime, providing flexibility for changing circumstances. In contrast, an irrevocable trust generally cannot be changed once executed, which limits the creator’s control but may provide tax or creditor protections. The choice between revocable and irrevocable depends on goals such as asset protection, tax planning, and control over distributions. For life insurance specifically, placing a policy in an irrevocable vehicle can remove it from the taxable estate, but that advantage comes with reduced personal control over the policy once transferred.
An ILIT is a trust designed specifically to own and manage life insurance policies. The trust agreement names the trustee and beneficiaries, sets distribution rules, and directs how policy proceeds are to be used after the insured’s death. By placing ownership with the trust, proceeds are typically paid to the trust and managed according to the trust’s terms. The trust may include instructions for premium payments, powers for the trustee to buy or sell policies, and provisions addressing cash flow to cover insurance costs or to make distributions for education, medical care or support of beneficiaries.
The grantor is the person who creates the trust and transfers property into it. The trustee is the person or institution responsible for administering the trust according to its terms and in the beneficiaries’ best interests. Trustees handle duties such as making premium payments if required, filing notices or tax forms, maintaining records, and distributing proceeds at the appropriate time. Choosing a trustee involves balancing trustworthiness, administrative ability, and availability; many choose a family member, trusted friend, or a professional fiduciary depending on the complexity of the trust and the needs of beneficiaries.
Beneficiaries are the individuals or entities entitled to receive trust distributions. With an ILIT, the trust itself is typically named as the policy beneficiary so proceeds flow into the trust rather than directly to individuals. The trust language should clearly describe how and when distributions occur, whether funds are for specific purposes such as education or healthcare, and conditions for discretionary distributions. Clear beneficiary designations and precise trust terms reduce ambiguity, help trustees make consistent decisions, and can protect funds from creditor claims or other family disputes.
When evaluating life insurance planning, you may compare naming individuals as direct beneficiaries, using revocable trust arrangements, or establishing an ILIT. Direct beneficiary designations are simple but may expose proceeds to estate taxes or creditor claims. A revocable trust offers centralized administration but may not remove the policy from the taxable estate. An ILIT can provide tax and protection benefits but requires careful funding and administration. The best option depends on policy size, family dynamics, tax considerations, and long-term objectives. We help clients weigh these choices and design a plan aligned with their priorities and legal constraints.
If your life insurance policies are modest in value and your estate is unlikely to face meaningful estate tax exposure, keeping beneficiary designations current and using a pour-over will or revocable trust might be an appropriate, low-cost approach. This route minimizes paperwork and ongoing administration while ensuring proceeds pass to desired heirs. It is particularly suitable when beneficiaries are financially capable adults and there are no complex creditor or special needs considerations. Periodic review of beneficiary forms and alignment with estate documents remains important even with this simpler approach.
When family relationships are straightforward and there are no concerns about creditor claims, creditor protection or complicated distribution instructions, a limited planning approach can be cost-effective and administratively simple. For households with small estates and no anticipated estate tax liability, the simplicity of naming beneficiaries directly or relying on basic trust arrangements often outweighs the benefits of more complex trust structures. Even then, maintaining clear documents and confirming beneficiary designations ensures the policy proceeds go to the intended recipients without unnecessary delay.
A comprehensive ILIT-based plan can be especially valuable when life insurance proceeds would otherwise be included in a large taxable estate, potentially triggering estate taxes or administrative complexities. By transferring ownership to an irrevocable vehicle and coordinating gifting and funding strategies, families may be able to limit estate inclusion and preserve more value for beneficiaries. Additionally, thoughtfully drafted trust terms can help insulate proceeds from certain creditor claims, divorces, or mismanagement, ensuring that funds are used in ways the grantor intends over time.
A comprehensive approach is often warranted when beneficiaries include minors, family members with limited financial capacity, or individuals with special needs. The trust can provide structured distributions, appoint trustees to manage funds responsibly, and include protections to prevent misuse. Coordination with other estate planning documents, retirement plan trusts, or special needs trusts ensures consistent outcomes and reduces the risk of conflicts. Ongoing administration rules within the trust provide clarity for trustees and help preserve the grantor’s intent across changing circumstances.
A comprehensive plan that integrates an ILIT with other estate documents offers predictable outcomes and greater control over how insurance proceeds are managed and distributed. It can reduce estate tax exposure, provide instructions for trustees, and coordinate with wills, living trusts, and powers of attorney. Thoughtful drafting addresses contingencies such as beneficiary incapacity, divorce or creditor claims, and sets out procedures for funding and administration that minimize dispute and delay. Knowing the plan is cohesive gives families confidence that assets will be used as intended.
In addition to tax and protection goals, a comprehensive approach supports practical estate settlement needs such as liquidity for paying final expenses, balancing distributions among heirs, and avoiding probate where possible. It also simplifies the trustee’s job by providing clear instructions and required documentation. For families with complex finances or mixed goals—such as preserving assets for future generations while providing current support—combining an ILIT with complementary trust instruments creates a more durable and manageable plan that adapts to life changes.
One of the main reasons clients pursue an ILIT within a larger plan is to manage potential estate tax exposure and ensure that insurance proceeds serve intended beneficiaries without being subject to estate inclusion. When implemented correctly, the trust removes the policy from the grantor’s taxable estate and can preserve more of the policy’s value for heirs. This requires timely transfers, proper beneficiary designations, and adherence to gift and transfer rules. Coordinating these steps with broader estate tax planning can improve financial outcomes for beneficiaries.
An ILIT gives the grantor the ability to direct how proceeds will be administered, including staggered distributions, specific uses, and protections against creditor claims or family disputes. This control supports beneficiaries who are minors or who may need guidance in handling funds responsibly. The trust can include provisions that limit distributions to essential needs or fund education and healthcare, while leaving discretionary authority to the trustee for other uses. These tailored terms help ensure proceeds are used in ways that reflect the grantor’s intentions long after they are gone.
When transferring a life insurance policy into an ILIT, clear documentation is essential. Ensure the insurer receives the trust documents and that ownership and beneficiary designations reflect the trust as owner and beneficiary where appropriate. Keep copies of transfer forms, trust agreements, and any correspondence with the insurer in a secure location. Trustees should also maintain a record of premium payments and any gifts used to fund the trust. Accurate records reduce confusion at claim time and support the legal and tax treatment you expected when creating the trust.
Estate plans evolve as family circumstances and laws change, so periodic review of the ILIT and the underlying policy is important. Confirm that premiums are paid, that the trust terms remain aligned with your goals, and that trustees continue to understand their duties. Consider reviews after significant life events and at intervals recommended by your advisor to catch issues early. Keeping the trust up to date helps preserve intended tax and protection benefits and reduces the likelihood of disputes or administrative hurdles when the policy is claimed.
Families typically consider an ILIT to preserve life insurance proceeds for heirs in a controlled and protected manner. An ILIT can remove proceeds from the taxable estate, provide structured distributions for beneficiaries, and reduce exposure to some creditor claims. It also addresses common needs such as ensuring funds for minor children, providing for a spouse while preserving assets for later generations, or protecting proceeds intended for members of blended families. The decision to use an ILIT depends on the value of the policy, family dynamics, and broader estate planning goals.
Beyond tax advantages, an ILIT can deliver peace of mind by setting clear rules for how proceeds are used and who manages them. This planning tool often integrates with other estate documents like revocable trusts, wills, power of attorney designations, and healthcare directives to create a coordinated approach. By identifying potential issues in advance—such as creditor exposure, beneficiary incapacity, or competing family interests—you can tailor the trust to reduce conflict and ensure funds support the long-term well-being of intended recipients.
Common circumstances prompting an ILIT include owning large life insurance policies, facing potential estate tax liability, desiring protections for beneficiaries with special needs or youth, and wanting to limit the risk of proceeds being claimed by creditors or during divorce. Business owners often use ILITs to provide liquidity for business transition planning, and blended families use them to balance support for a surviving spouse with inheritance goals for children. Each situation requires tailored drafting to achieve the desired combination of protection and flexibility.
When life insurance policies are large relative to the estate, proceeds may be needed to pay estate taxes, debts, or administrative expenses. Placing the policy in an ILIT can ensure proceeds are available for those purposes without being subject to probate delays or estate inclusion. This can be particularly important for estates that lack liquid assets to cover obligations. Proper planning ensures the trust is funded and the trustee has clear authority to deploy proceeds where they are most needed to preserve the family’s financial stability.
Families concerned about estate tax exposure use ILITs as part of a broader tax planning strategy to preserve value for future generations. Removing the policy from the grantor’s estate can reduce estate tax liability and allow the trust to manage distributions for the long term. When paired with other planning tools—such as generation-skipping strategies or lifetime gifting—the ILIT can play a central role in transferring wealth according to the grantor’s objectives while balancing current and future needs of heirs.
An ILIT can provide safeguards for beneficiaries who are minors or who have special needs by directing how funds are used and by appointing a trustee to manage distributions responsibly. This prevents lump sum distributions that may harm long-term financial security and allows the trust to fund ongoing care, education, or support without jeopardizing government benefits when properly coordinated. Trust provisions can be tailored to provide for specific needs while preserving eligibility for public assistance programs where required.
Residents of Hayfork and Trinity County can access tailored ILIT planning through the Law Offices of Robert P. Bergman, which provides clear guidance on document drafting, funding mechanics and trustee responsibilities. We help clients determine whether an ILIT aligns with their estate plan, assist with required transfers and gifting strategies, and prepare the administrative documentation trustees will need. Our goal is to make the process manageable and to create trust terms that reflect each family’s values and objectives, whether planning for liquidity, legacy or protection of beneficiaries.
Choosing counsel for ILIT matters involves selecting a firm that prioritizes careful drafting, practical administration and coordination with insurers and financial advisors. The Law Offices of Robert P. Bergman focus on creating trust documents that are clear, durable and aligned with state law and client goals. We take time to explain funding steps and trustee duties so clients and their families understand how the plan operates both before and after the insured’s death. Clear communication and attention to detail help avoid unintended results at a critical time.
Our service includes reviewing existing estate documents such as revocable living trusts, wills, powers of attorney and beneficiary forms to ensure consistency across the estate plan. We assist with trust drafting, transferring policy ownership, and preparing any notices or documentation insurers require. Trustees receive guidance on their recordkeeping and administrative obligations, and we can coordinate with financial professionals to support premium funding and related financial arrangements. This integrated approach reduces gaps and aligns the entire plan.
We understand the practical considerations families face and aim to provide solutions that are both protective and manageable over time. Whether updating legacy documents, addressing changes in family circumstances, or implementing a new trust, we tailor recommendations to meet your objectives and maintain flexibility where appropriate. For Hayfork clients and those across Trinity County, we provide responsive service designed to ease the administrative burden and preserve the benefits of proper trust implementation.
Our process begins with an intake meeting to review your goals, existing policies and estate documents, followed by a recommended plan that addresses drafting, funding and administration. We draft the trust and related documents, coordinate changes in policy ownership, and prepare any necessary funding or gifting paperwork. After implementation we provide guidance for trustees on premium payments, recordkeeping and claim procedures. Throughout we focus on communication, documenting steps taken, and ensuring the trust operates as intended when it is needed most.
At the outset we gather information about existing life insurance policies, beneficiary designations, family circumstances and estate planning objectives. That includes discussing policy types, owners, beneficiaries, and any issues such as special needs beneficiaries or potential tax concerns. From this review we recommend whether an ILIT is appropriate and how it should be structured. We also identify necessary coordination with other documents and any funding or gifting steps required to support premium payments and the long-term viability of the trust.
We collect and review policy declarations, beneficiary forms, existing wills and trusts, and financial summaries relevant to your plan. This review reveals whether ownership transfers are needed, what gifting mechanics will support premium payments, and whether complementary documents should be updated. Clear documentation during this phase helps avoid unintended tax consequences and ensures the trustee will have authority and guidance to manage the policy and distribute proceeds according to your wishes.
Once goals are set, we draft the ILIT agreement with precise distribution terms, trustee powers, and administrative provisions. Auxiliary documents may include funding schedules, letters of instruction, pour-over wills, or other trust instruments to coordinate the overall estate plan. Our drafting emphasizes clarity to reduce trustee guesswork and preserve intended tax treatment. We review the draft with you and make adjustments to ensure the trust reflects your priorities and is practical for trustees to implement.
Funding an ILIT typically involves changing the policy owner to the trust and ensuring premium payments are made either through gifts to the trust or by other funding mechanisms. Properly documenting transfers with the insurer and maintaining records of gifts or payments is essential for the trust to operate as intended. We assist in completing ownership change forms, coordinating with the insurance carrier, and advising on gift tax considerations and annual gifting strategies if needed to support premium payments.
Transferring ownership requires submitting the trust documentation to the insurer, completing change of ownership forms, and confirming that beneficiary designations list the trust where appropriate. Timing matters, particularly for policies issued or transferred close to the insured’s death, so we ensure steps are taken with care. We also assist in documenting the transfer for tax and estate records, helping trustees demonstrate the transfer was completed properly when the policy is later claimed.
Coordination with the insurance company and other financial institutions helps prevent administrative delays and ensures premium payments continue uninterrupted. We communicate with carriers to clarify requirements, help trustees establish trust bank accounts if needed, and confirm any forms or endorsements required by the insurer. Good coordination reduces the risk of inadvertently voiding coverage or creating disputes about ownership or beneficiary status at claim time.
After the trust is funded, ongoing administration includes making or documenting premium payments, maintaining records, and following distribution instructions when a claim arises. Trustees should keep accurate books, preserve correspondence with insurers, and follow the trust’s procedures for distributions and discretionary decisions. Periodic reviews ensure the trust remains aligned with current laws and family circumstances and that any necessary adjustments are made through appropriate legal channels rather than informal changes.
Trustees must manage premium payments, maintain financial records, and execute distributions in accordance with trust terms. Keeping detailed records of gifts to the trust, premium invoices, and communications with insurers helps provide clarity at claim time. Trustees should also be familiar with the trust’s instructions for discretionary distributions, taxation issues, and any notice requirements for beneficiaries. We provide guidance on these administrative duties so trustees can fulfill their role responsibly and transparently.
Because an ILIT is irrevocable, modifications are limited and may require legal steps such as trust modification petitions or court approvals in certain circumstances. If family circumstances change materially or if errors need correction, trustees or interested parties may turn to the court to request modifications. We assist with petitions such as Heggstad petitions, trust modification requests, or other filings when necessary, and we advise on alternatives that preserve the trust’s benefits while resolving practical issues that arise over time.
An ILIT is a trust that owns a life insurance policy and holds proceeds for beneficiaries under the trust’s terms. The grantor transfers ownership of a policy into the trust and names the trust as beneficiary, allowing the trustee to manage proceeds and distribute funds according to specified instructions. This structure can remove policy proceeds from the grantor’s taxable estate when transfers are properly timed and documented. An ILIT can be used to provide liquidity for estate-related expenses, to support dependents, or to achieve particular distribution objectives for family members. Setting up an ILIT involves drafting the trust agreement, transferring or issuing the policy in the trust’s name, and documenting funding mechanisms for premium payments. Trustees have administrative duties such as maintaining records and coordinating with insurers. Because the trust is generally irrevocable, careful planning at the outset is important to ensure the trust meets the grantor’s objectives and integrates with other estate planning documents.
When ownership of a life insurance policy is transferred to an ILIT and the transfer is completed outside the grantor’s estate at the time of death, policy proceeds are typically excluded from estate taxation. This can preserve more of the policy’s value for beneficiaries when estate tax exposure is a concern. Timing and the method of transfer matter; transfers made shortly before death may be subject to look-back rules that include proceeds in the estate. How the trust is funded and whether gifts are used to pay premiums can also affect tax treatment. Coordination with broader estate tax planning is critical. The ILIT should be drafted and funded in a way that aligns with estate tax goals and with other documents such as revocable trusts and wills. We work through timing, gifting mechanics, and documentation to help ensure the intended tax benefits are achieved and that trustees can demonstrate the validity of transfers if questioned.
After an ILIT is created and ownership is transferred, changing beneficiaries is generally limited because the trust is irrevocable. The trust’s terms determine who benefits and under what conditions, and those terms cannot typically be altered unilaterally by the grantor. In some cases, the trust may include limited amendment powers or provisions for adding successor beneficiaries under defined circumstances. If substantial changes are needed, interested parties may pursue court-approved modifications, but that process can be complex and is not guaranteed. Because beneficiary changes are constrained, it is important to consider long-term goals and potential life changes when drafting the trust. Discussing various scenarios upfront and including flexible distribution mechanisms can reduce the need for future court involvement. Periodic reviews can identify whether other planning tools are needed to address evolving family circumstances.
Selecting a trustee requires balancing trustworthiness, administrative ability and impartiality. Many clients appoint a trusted family member or friend who understands the family’s dynamics and the grantor’s wishes, while others appoint a corporate fiduciary or professional trustee to handle complex administration. The trustee must be able to manage premium payments, keep accurate records, interact with insurers, and follow the trust’s distribution instructions. Consideration should be given to trustee availability over the long term and whether successor trustees are named. The trust can also provide guidance for trustees by specifying distribution standards, reporting requirements, and compensation if appropriate. Naming co-trustees or successor trustees provides continuity, and clear instructions reduce the risk of disputes. We help clients evaluate trustee options and draft provisions that support effective administration.
An ILIT can affect eligibility for public benefits depending on timing and how funds are distributed. Because the trust holds life insurance proceeds rather than releasing them directly to a beneficiary, distributions can in some cases be structured to avoid impacting means-tested benefits if the trust is drafted with that consideration. However, the rules governing public benefits differ by program, and improperly structured distributions can affect eligibility. It is important to coordinate an ILIT with advice about specific benefit programs when a beneficiary relies on public assistance. For families with a beneficiary who receives public benefits, alternative trust instruments such as a qualified disability trust or special needs trust may be more appropriate to preserve eligibility. We work with clients to craft trust language that aligns with beneficiaries’ needs and applicable benefit rules while still achieving estate planning goals.
When the insured dies, the insurance company pays policy proceeds to the named beneficiary, which in the case of an ILIT is the trust. The trustee then administers and distributes those proceeds according to the trust’s instructions, which may include immediate distributions, staged payments, or funds reserved for specific needs. The trustee is responsible for submitting required claim paperwork to the insurer, managing trust assets, and communicating with beneficiaries about distributions and trust administration. Trust administration may also involve tax filings, creditor claims, or coordination with estate representatives if other assets are involved. Maintaining thorough records, following the trust’s provisions and seeking legal or tax advice when questions arise helps ensure distributions are handled properly and efficiently.
The time to establish an ILIT varies based on complexity, whether new policies must be issued, and how quickly ownership transfers can be processed by insurers. Drafting the trust and completing internal approvals can take a few weeks, while transfers and coordination with insurers may extend that timeline. If a policy must be issued in the trust’s name or if gifting steps are needed to fund premiums, additional coordination with financial institutions and advisors can add time. Starting early avoids rushed transfers that could create unintended tax consequences. For clients with straightforward circumstances and existing policies, implementation can often be completed in a matter of weeks. More complex situations—such as switching ownership on multiple policies, addressing special needs beneficiaries, or coordinating intergenerational planning—require additional planning time. We outline a practical timeline during the initial review so clients know what to expect.
An ILIT can own different types of life insurance, including term life, whole life and universal life policies, depending on funding objectives and the needs of beneficiaries. The trust’s terms should address the trustee’s powers to pay premiums, to surrender or exchange policies if appropriate, and to manage cash values associated with permanent policies. Policy selection and ownership considerations should reflect long-term premium affordability, the trust’s funding sources, and the grantor’s estate planning goals. When permanent policies with cash value are involved, trustees should have clear authority to manage those values and to obtain financial advice when needed. For term policies, attention to renewal, conversion features and affordability is important so the trust remains effective throughout the insured’s life. We assist clients in selecting and documenting these arrangements.
Common pitfalls with ILITs include improper transfers of ownership, failing to document gifts used for premium payments, and neglecting to coordinate beneficiary forms and other estate documents. Transfers made too close to the insured’s death may be subject to look-back rules that include proceeds in the estate. Inadequate recordkeeping or unclear trust language can create disputes or reduce the intended protections. Regular reviews and clear documentation help avoid these issues. Another common mistake is not planning for premium funding, leaving the trustee without a clear mechanism to pay ongoing premiums. This can jeopardize coverage and the trust’s purpose. Including funding instructions, naming successor trustees, and keeping beneficiaries informed reduces administrative risk and preserves the trust’s benefits.
Costs to establish and maintain an ILIT vary with complexity, the number of policies, and whether professional trustees or advisors are engaged. Initial costs typically include drafting the trust agreement, coordinating transfers, and preparing any related documents such as pour-over wills or powers of attorney. Ongoing costs can include trustee compensation, tax preparation, recordkeeping and costs associated with premium funding. For many families the value preserved through tax and protection benefits outweighs these administrative expenses. We provide transparent estimates based on the services required and can discuss ways to manage ongoing costs, such as limiting trustee duties or consolidating administrative tasks. During an initial consultation we outline expected fees and help clients weigh those costs against the potential financial and family benefits of establishing the trust.
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