An irrevocable life insurance trust (ILIT) can be a powerful tool in an estate plan for families in Exeter and throughout Tulare County. At the Law Offices of Robert P. Bergman, our approach focuses on clear, practical solutions for preserving life insurance benefits while addressing potential tax and probate concerns. An ILIT transfers ownership of a life insurance policy into a trust that cannot be changed unilaterally after it is signed, which can help protect proceeds for beneficiaries and may remove those proceeds from the insured’s estate for estate tax purposes. We craft ILITs that align with your broader estate planning goals, including coordination with wills, revocable living trusts, and beneficiary planning.
Choosing to establish an ILIT involves careful attention to drafting, funding, and ongoing administration. The trust document must be prepared to meet legal requirements and reflect the policy ownership transfer, beneficiary designations, and distribution provisions. Proper administration includes trustee selection, gift funding for premium payments, and compliance with the three-year lookback period that can affect estate tax treatment. For many families, an ILIT is a long-term commitment intended to provide liquidity for estate expenses, to replace lost income, or to preserve assets for heirs. Our office helps clients in Exeter through the full lifecycle of the ILIT, from initial planning to trustee guidance and administration.
An ILIT offers several benefits that can enhance an overall estate plan: removing life insurance proceeds from the insured’s taxable estate, providing liquidity to pay estate taxes and final expenses, and ensuring policy proceeds are distributed according to your wishes rather than subject to probate. Beyond tax and probate considerations, an ILIT can be structured to provide protection for beneficiaries who might otherwise face creditor claims or mismanagement. Establishing an ILIT also creates a clear administrative framework under which premiums are paid and the trustee handles distributions, reducing confusion and family disputes during an emotional time. Thoughtful drafting tailors these advantages to your family’s financial situation and long-term objectives.
The Law Offices of Robert P. Bergman serves clients across Tulare County and the surrounding California communities with a focus on estate planning matters including ILITs, revocable living trusts, wills, and healthcare directives. Our firm prioritizes personalized planning, taking time to understand each client’s family dynamics, financial picture, and long-term goals. We guide clients through trust selection, drafting, funding mechanics, and trustee responsibilities, while coordinating with financial advisors and insurance agents as needed. Our aim is to deliver practical guidance and durable documents that reduce future uncertainty and help protect family assets for the intended beneficiaries.
An ILIT is a trust designed specifically to own and manage life insurance policies. Once properly funded, the trust becomes the owner and beneficiary of one or more life insurance policies, which allows the proceeds to be held and distributed by the trust rather than passing through probate. For families concerned about estate taxes, creditor protection, or orderly distribution, the ILIT can provide a degree of control over how proceeds are used and when beneficiaries receive funds. Legal considerations include the timing of transfers, compliance with tax rules, and the selection of an appropriate trustee who will manage the trust in alignment with your objectives.
Setting up an ILIT usually involves multiple steps: drafting the trust document, transferring or purchasing the policy in the trust’s name, funding the trust so it can pay premiums, and establishing administrative procedures for distributions. A particularly important tax consideration is the three-year inclusion period under federal tax law: if the insured transfers an existing policy into the ILIT and dies within three years, the proceeds may remain part of the estate. Careful planning often avoids that outcome by purchasing the policy directly in the ILIT or observing the timing of transfers and premium funding.
An irrevocable life insurance trust is a legal entity created to hold life insurance policies and distribute proceeds according to instructions set out in the trust instrument. The trust is considered irrevocable because, once established and funded, the grantor generally cannot unilaterally change its terms. The trustee manages the policy, receives death proceeds, pays expenses as directed by the trust, and distributes funds to beneficiaries under the trust’s provisions. The structure separates ownership of the policy from the insured individual, which can lead to estate tax advantages and ensure that proceeds are used in a manner consistent with the grantor’s intentions.
Key elements of an ILIT include the trust document itself, designation of trustee and successor trustees, funding provisions to cover premiums, beneficiary designations that align with the trust, and rules for distributions. Administrative processes encompass documenting transfers or purchases of policies, maintaining records of premium gifts to the trust, issuing Crummey notices to beneficiaries when required, and ensuring tax reporting compliance. The trustee’s duties also include communicating with beneficiaries, managing investments if funds are held in the trust, and following the distribution instructions in the trust document so that proceeds are applied according to the grantor’s wishes.
Understanding key terms helps clients make informed decisions about ILITs. This glossary covers common concepts such as grantor, trustee, beneficiary, funding, Crummey power, and the three-year inclusion rule. Each term relates directly to how an ILIT is set up and administered, and having clarity on these items reduces confusion during planning and after a claim is paid. Our goal is to demystify the legal language and provide straightforward explanations so that clients can confidently choose the structure and provisions that best meet their estate planning priorities.
The grantor is the person who creates the trust and transfers assets or arranges for the trust to own a life insurance policy. In ILIT planning, the grantor typically funds the trust by making gifts to cover insurance premiums or by transferring an existing policy to the trust. The grantor’s intentions and instructions inform the trust document’s terms and distribution directives. While the grantor establishes the trust, the trust is a separate legal entity once executed, and trust ownership removes the policy from the grantor’s direct control in exchange for the tax and administrative benefits the ILIT is designed to provide.
A trustee manages the trust assets, oversees premium payments, communicates with beneficiaries, and follows the trust document’s distribution instructions. Trustees have fiduciary responsibilities to act in the best interests of beneficiaries and to keep accurate records of trust activities. In ILITs, trustees also coordinate with insurance carriers, handle claims when the insured passes away, and ensure that any required notices or tax filings are completed. Selecting a trustee who is organized and understands the administrative requirements helps ensure the trust operates smoothly and fulfills the grantor’s intentions.
A Crummey notice is a written communication to beneficiaries that notifies them of a right to withdraw a gift made to the trust for a limited period. The notice preserves the gift’s status as a present interest, which may qualify it for the annual gift tax exclusion. In the context of an ILIT, Crummey notices are often used when the grantor makes gifts to the trust to fund premium payments. Properly timed notices and recordkeeping are important to maintain favorable tax treatment and to document that beneficiaries were given the withdrawal right consistent with applicable tax guidance.
The three-year inclusion rule refers to the federal tax provision that may include life insurance proceeds in the insured’s estate if the insured transferred ownership of the policy within three years of death. To avoid this outcome, many planners recommend that either the policy be purchased directly by the ILIT or that the transfer happen more than three years before death. The rule is an important timing consideration when moving existing policies into a trust, and clients should plan accordingly to ensure the intended estate tax and probate benefits materialize.
When considering an ILIT, it is useful to compare it with alternatives such as leaving the policy owned personally, naming beneficiaries directly, or using a revocable trust. Each approach has different implications for estate taxes, probate, creditor protection, and control over distributions. Ownership in a revocable trust may avoid probate but will not remove proceeds from the taxable estate while funds held personally generally remain subject to probate and estate tax considerations. An ILIT’s distinct value is its potential to remove proceeds from the estate and provide a structured distribution mechanism, though it requires more administration and irrevocable commitment.
If the life insurance policy’s death benefit is relatively small compared to an overall estate, the costs and administration of an ILIT may outweigh the potential benefits. In such cases, keeping the policy in personal ownership with clear beneficiary designations can simplify matters and avoid additional trust administration. Families with modest policy sizes may prefer straightforward beneficiary updates and coordination with a will or revocable trust. That approach reduces paperwork and ongoing trustee responsibilities while still ensuring proceeds pass to named recipients quickly upon claim approval.
When the insured’s estate falls well below federal and state estate tax thresholds and creditor exposure is not a significant concern, the benefits of an ILIT can be limited. Families in this situation often prioritize simplicity and liquidity, favoring direct beneficiary designations or integration into a revocable trust for probate avoidance. In these circumstances, the administrative requirements of an ILIT, including premium funding and trustee duties, may add complexity without delivering meaningful tax or protection advantages. Each decision should reflect your financial picture and long-term objectives.
When a life insurance policy carries substantial death benefits or when an estate requires immediate liquidity to cover taxes, debts, or ongoing obligations, an ILIT can be an effective solution. A well-drafted trust ensures proceeds are available to meet these needs without subjecting assets to probate delays. The ILIT can be designed to provide clear instructions for distributions, allowing families to avoid forced asset sales or financial strain while beneficiaries settle the estate. In such cases, comprehensive planning coordinates the ILIT with the overall estate strategy to address both immediate liquidity and long-term preservation goals.
In situations where beneficiaries may face creditor claims, divorce, or other financial risks, an ILIT can protect insurance proceeds by holding them in trust and distributing them under tailored conditions. This structure can shield funds until beneficiaries reach maturity, meet certain milestones, or manage funds responsibly. By establishing distribution rules and appointing a trustee to oversee administration, an ILIT safeguards the grantor’s intention that proceeds benefit loved ones rather than being consumed by outside claims, offering an added layer of financial protection for future generations.
A comprehensive approach to ILIT planning integrates the trust with other estate planning documents to ensure consistency and avoid unintended consequences. This coordination can address beneficiary designations, successor trustee arrangements, and the interaction between the ILIT and any revocable family trusts or wills. Thorough planning includes considering tax rules, funding mechanics, and administrative obligations so that the ILIT operates effectively over time. The result is a cohesive plan that provides predictable outcomes, minimizes surprises for family members, and supports orderly handling of life insurance proceeds when they are needed most.
Comprehensive planning also anticipates future changes, such as adjustments to beneficiaries, additional policies, or modified distribution instructions. By documenting clear procedures for modifications where allowed and setting out successor trustees, the plan helps ensure continuity in administration. This foresight can reduce disputes and provide guidance to trustees facing real-world decisions. In addition, a complete plan often outlines communication practices with heirs and advisors, promoting transparency and reducing the likelihood of family friction during an already difficult period.
One primary benefit of integrating an ILIT into a broader estate plan is reducing the likelihood that life insurance proceeds will be included in the insured’s taxable estate. Properly structured, an ILIT can remove proceeds from taxable estate calculations and provide liquidity to pay taxes and debts without resorting to asset sales or probate distributions. The trust document can also direct how proceeds are to be used, ensuring funds contribute to estate settlement, family support, or other designated purposes. This careful alignment between trust design and estate needs preserves more value for the intended beneficiaries.
Another significant advantage of a comprehensive ILIT approach is the ability to control when and how beneficiaries receive proceeds. The trust can impose conditions, stagger distributions over time, or require that funds be used for specific purposes such as education, health care, or support. This protection helps prevent impulsive spending, shields assets from certain creditor claims, and provides a mechanism to support vulnerable beneficiaries. Tailored distribution provisions allow the grantor to match the arrangement to family dynamics, financial needs, and long-term objectives.
One important tip is to ensure policy ownership and beneficiary designations are coordinated with the ILIT terms so that the trust is properly positioned to receive proceeds. If a policy remains in the insured’s name or a beneficiary is named outside the trust, the intended benefits of the ILIT could be undermined. Review ownership documents with your insurance carrier, confirm that the ILIT is listed as owner and beneficiary where appropriate, and update records whenever changes are made. Clear documentation avoids confusion and supports the trust’s intended estate, tax, and distribution outcomes.
Selecting a trustee who keeps clear records, communicates effectively with beneficiaries, and follows the trust provisions is essential for smooth administration. Trustees should be prepared to coordinate with insurance carriers, handle claims, and maintain tax and gift documentation. A corporate trustee or a trusted individual with administrative skills can help avoid misunderstandings and ensure the trust fulfills its purpose. Consider naming successor trustees and providing guidance about how distributions should be managed to promote stability and continuity in how the trust operates over time.
Families in Exeter and nearby communities consider an ILIT for various reasons such as the desire to preserve life insurance proceeds for heirs, to provide estate liquidity, or to shield funds from probate and other estate processes. An ILIT may be especially valuable when a policy’s death benefit is large relative to the rest of the estate, when there are potential creditor or divorce risks to beneficiaries, or when the grantor wishes to provide structured distributions. By establishing a trust with clear distribution directives, grantors can make sure the insurance proceeds serve intended purposes and support family members according to their wishes.
Other important reasons to consider an ILIT include coordinating benefits with retirement plan distributions, protecting proceeds for minor or vulnerable beneficiaries, and ensuring that taxes and final expenses can be covered promptly upon the insured’s death. The ILIT can also be an element of broader tax planning for those with estates approaching federal or state thresholds. Discussing family goals, financial circumstances, and beneficiary needs helps determine whether an ILIT is the right component of a well-rounded estate plan tailored to your situation in Tulare County and California.
Situations that often prompt consideration of an ILIT include large life insurance policies, estates that need liquidity to cover taxes and debts, concerns about beneficiaries’ financial stability, or the desire to provide ongoing support for a surviving spouse or children. An ILIT may also be appropriate where there are blended family dynamics, business succession concerns, or a need to protect proceeds from claims by creditors or beneficiaries’ creditors. Each circumstance calls for tailored drafting to ensure the trust accomplishes the specific aims of the grantor while maintaining legal and tax compliance.
When a policy carries a large death benefit relative to the rest of the estate, an ILIT can help keep those proceeds out of estate calculations and provide liquidity for any estate taxes. This can prevent forced sales of assets and help preserve family property and business interests. Planning should consider timing, ownership transfers, and whether the trust will purchase a policy or accept an existing one. A well-constructed ILIT aligns the policy’s value with estate needs and supports orderly transitions upon the insured’s passing.
If beneficiaries include minors, people with disabilities, or those who may struggle to manage large sums, an ILIT offers a mechanism to hold and distribute funds under controlled terms. The trust can specify conditions for distribution, such as age milestones, educational expenses, or health care needs, ensuring proceeds are used in ways the grantor intends. This structure helps prevent mismanagement and can protect assets from creditors or claims that might otherwise reduce the benefit to intended recipients.
Business owners may use an ILIT to provide liquidity for succession planning, enabling heirs to buy out interests or cover tax liabilities without disrupting ongoing operations. Life insurance proceeds held in trust can be earmarked for specific business uses or to support family members during a transitional period. By setting clear terms for distributions, an ILIT helps preserve the business value while meeting estate obligations and supporting the owner’s succession intentions across generations.
The Law Offices of Robert P. Bergman serves Exeter and Tulare County residents with estate planning services tailored to local needs. We offer in-person and remote consultations to discuss ILITs, revocable trusts, wills, powers of attorney, and healthcare directives. Our office assists clients in evaluating whether an ILIT is appropriate, guiding them through drafting, funding, trustee selection, and ongoing administration. For families seeking clarity and durable estate plans, we provide practical advice and document preparation aimed at achieving predictable results and preserving assets for future generations.
The Law Offices of Robert P. Bergman brings a client-centered approach to ILIT planning, focusing on practical solutions that reflect each family’s unique needs. We take the time to explain complex legal and tax considerations in understandable terms, coordinate with insurance carriers and financial advisors as needed, and prepare documents that align with your long-term goals. Our office helps clients anticipate administrative responsibilities and establishes procedures to ensure reliable premium funding and trustee accountability, making the ILIT a functional part of your comprehensive estate plan.
We assist with all phases of ILIT work, from initial design to trustee guidance and claim administration. Our services include drafting trust documents, preparing Crummey notices, advising on funding mechanics, and supporting trustees with recordkeeping and distribution decisions. We also review beneficiary designations and coordinate the ILIT with existing wills and trusts to avoid conflicts. This hands-on support helps ensure the ILIT operates as intended and that beneficiaries receive the benefit of thoughtful planning when the time comes.
Clients in Exeter benefit from working with a local firm familiar with California estate planning considerations and the practical realities families face in Tulare County. We prioritize clear communication and timely service, and we provide options tailored to varying family structures, business interests, and financial circumstances. Our aim is to deliver trust documents and administrative plans that stand the test of time and reduce uncertainty for heirs, helping families achieve peace of mind regarding life insurance proceeds and their role in a broader estate plan.
Our process begins with a thorough intake to understand family dynamics, financial assets, policy details, and estate goals. We then recommend a structure for the ILIT, prepare the trust document, coordinate with your insurance carrier to transfer ownership or purchase the policy in the trust’s name, and document funding arrangements for premiums. After the trust is established, we provide guidance to trustees on administration, recordkeeping, and claims procedures. Ongoing review and updates ensure the ILIT continues to meet your needs as circumstances change over time.
The first step is a comprehensive consultation to gather details about existing policies, estate objectives, family considerations, and financial circumstances. We review the size of insurance proceeds, current beneficiary designations, and whether the policy should be purchased directly by the trust or transferred into it. We discuss funding mechanisms for premiums, potential tax implications, and trustee selection. This planning conversation forms the foundation of a tailored ILIT that aligns with estate goals and addresses timing concerns such as the three-year inclusion rule.
During the intake phase, we collect copies of insurance policies, beneficiary forms, and financial statements, and we document family relationships and objectives for distribution. This information helps determine whether an ILIT is appropriate and guides the drafting of precise distribution instructions. Clear communication about the grantor’s priorities ensures the trust is designed to reflect those intentions and that practical issues like premium payment logistics and trustee responsibilities are addressed up front to reduce later complications.
We advise whether to have the trust purchase a new policy or to transfer an existing policy into the ILIT, considering the three-year rule and other tax implications. Funding options for premium payments are discussed, including annual gifts and projected costs over the life of the policy. The goal is to create a funding strategy that keeps the policy in force while preserving desired tax treatment and minimizing administrative burdens. We also guide clients on beneficiary notice procedures and recordkeeping needed for compliance.
After planning decisions are made, we draft the ILIT document with clear trustee duties, distribution provisions, and funding instructions. The trust instrument can include optional provisions tailored to your family, such as distribution conditions, spendthrift protections, or rules for successor trustees. We review the draft with you, make adjustments as needed, and arrange for proper execution and notarization. Once signed, we coordinate transfers of ownership or policy purchases and ensure that all necessary documentation is filed with the insurance carrier.
This step focuses on final review of trust provisions to confirm the document reflects the grantor’s objectives and addresses administration details. We verify trustee acceptance, confirm contingencies for successor trustees, and ensure distribution terms are clear and enforceable. The trust is then signed and properly executed according to state requirements. Proper execution establishes the trust as a legal entity ready to hold the insurance policy and to operate under the agreed terms upon the grantor’s death or other triggering events.
We work with your insurance carrier to change ownership and beneficiary designations if needed, or to arrange for the ILIT to purchase a new policy. Documentation is provided to the carrier to reflect the trust as owner and beneficiary, and we confirm that premiums are set up to be paid from trust funds or that gifts will be made to the trust for that purpose. Clear communication with the carrier prevents administrative delays and ensures the policy is properly recognized as trust-owned.
Once the ILIT is established, the trustee must administer premium payments, provide notices when gifts are made, keep records, and follow distribution instructions after a claim is paid. We offer trustee guidance on these tasks, assist with preparing any required notices for beneficiaries, and provide support when a claim arises. Periodic reviews help ensure the trust remains aligned with changing circumstances, and we assist with any necessary amendments in areas where the trust allows modifications or with the creation of complementary documents in the overall estate plan.
Trustees should maintain clear records of premium gifts, Crummey notices, account statements, and any distributions or administrative expenses paid from the trust. Reliable recordkeeping supports tax compliance and provides transparency for beneficiaries. We provide templates and advice for records and communications to ensure trustees understand their responsibilities. Consistent documentation and thoughtful communication reduce misunderstandings and make it easier to administer the trust efficiently when benefits are paid.
When the insured dies, the trustee files the claim with the insurer, gathers proof of death and policy documentation, and manages the receipt and distribution of proceeds according to the trust terms. We assist trustees through this process, advising on timely claim submission, tax reporting obligations, and implementing distribution provisions. Proper handling ensures proceeds are used as intended and that required filings and notices are completed accurately, helping beneficiaries receive support while minimizing administrative hurdles.
An irrevocable life insurance trust is a trust that owns a life insurance policy and holds the death benefit for the benefit of named beneficiaries under instructions set by the grantor. Once the trust is executed and funded, the policy ownership belongs to the trust rather than the insured individual, which can change how proceeds are treated for estate and probate purposes. The trustee manages the policy, coordinates premium payments if necessary, and administers distributions following the trust’s terms, ensuring proceeds are handled according to the grantor’s plan. Setting up an ILIT involves drafting a trust document that names the trustee and beneficiaries, transferring or purchasing the policy in the trust’s name, and establishing funding mechanisms for premiums. The trust is typically irrevocable, meaning the grantor cannot unilaterally change key terms after execution, so careful planning is necessary to match the structure to family goals. Proper documentation and coordination with the insurance carrier are important to ensure the trust is recognized as owner and beneficiary.
An ILIT can reduce the portion of life insurance proceeds that would otherwise be included in the insured’s taxable estate by removing ownership of the policy from the insured. When the trust is properly structured and funded, and when timing rules are observed, proceeds paid to the ILIT may not be counted as part of the estate for federal estate tax purposes. California does not levy a separate state estate tax at present, but federal estate tax considerations remain relevant for larger estates and planning should account for that possibility. Tax implications depend on timing and ownership. If an existing policy is transferred into an ILIT within three years of the insured’s death, the proceeds could still be included in the estate under federal rules. To optimize tax outcomes, planners may recommend purchasing a policy directly in the trust or allowing sufficient time between a transfer and the insured’s death. Consulting about individual estate values and tax exposure helps determine the appropriate strategy for your situation.
Yes, an existing life insurance policy can often be transferred into an ILIT, but the timing and tax consequences must be considered carefully. Transfers completed within three years of the insured’s death may cause the proceeds to remain part of the insured’s taxable estate. A transfer may also have implications for the policy’s incontestability clauses or require carrier approval, and it is important to coordinate with the insurer to ensure assignments of ownership are properly recorded. Because of the three-year rule and other practical considerations, many planners evaluate whether purchasing a new policy in the trust or transferring an existing one is the better option. If a transfer is made, documentation of the transfer and the funding of premium payments should be maintained. Consulting early helps identify the best path for integrating an existing policy into your broader estate plan.
Choosing a trustee is an important decision for an ILIT because the trustee will manage the policy, handle claims, maintain records, and distribute proceeds following the trust document. A trustee might be a trusted family member, a friend with strong administrative skills, an institutional trustee, or a combination through co-trustees. The best trustee is someone who can act impartially, communicate with beneficiaries, and carry out recordkeeping and reporting duties responsibly. It is also wise to name successor trustees and to provide guidance on trustee powers and limitations in the trust instrument. If the trustee will need to handle complex tasks like investing trust funds or managing distributions for vulnerable beneficiaries, choosing a trustee with those capabilities or planning for professional assistance can help ensure the trust operates effectively and in accordance with the grantor’s intentions.
Once a policy is owned by an ILIT, the trust must have funds to pay premiums to keep the policy in force. Commonly, the grantor makes annual gifts to the trust sufficient to cover premiums, and those gifts may qualify for the annual gift tax exclusion if certain conditions are met. Alternatively, the trust may hold assets earmarked for premium payments. Proper planning about how premiums will be funded is essential to avoid lapse of coverage and to preserve the intended benefits of the ILIT. Documentation of gifts and any beneficiary notices, often through Crummey notices, helps support the tax treatment of funding. Trustees should maintain clear records of premium payments, bank statements, and transfer documentation to demonstrate that the trust was properly funded and premiums were paid as required. Careful administration prevents unintended policy lapses and ensures the trust remains effective when benefits become payable.
A Crummey notice is a written communication to notify beneficiaries that a gift has been made to the trust and that they have a limited right to withdraw that gift for a short period. The purpose of the notice is to establish that the gift is a present interest, which may qualify it for the annual gift tax exclusion under federal tax rules. In ILIT funding, Crummey notices are often used when the grantor makes annual premium gifts to the trust to ensure those contributions qualify for exclusion. Proper timing, content, and recordkeeping for Crummey notices are important to preserve favorable tax treatment. Beneficiaries do not commonly exercise the withdrawal right, but providing the notice and documenting the absence of withdrawals demonstrates compliance with tax guidance. Trustees should follow a consistent process for issuing notices and retaining proof that beneficiaries received notice in case documentation is needed later.
An ILIT can offer some protection against creditors of beneficiaries by holding proceeds in trust rather than distributing them directly. When funds remain subject to the trust’s distribution rules and spendthrift protections are included, creditors may have limited access to trust assets depending on the terms and applicable law. This can be an effective way to preserve proceeds for intended uses and protect them from certain claims that beneficiaries might otherwise face. However, the degree of creditor protection depends on the trust’s provisions and state law, and some creditor claims can reach trust distributions in certain circumstances. The trust should be drafted carefully to include appropriate protective language where permitted, and trustees should follow distribution rules closely to maintain these protections. Consultation about beneficiary circumstances and creditor risks helps determine how to structure provisions for maximum benefit.
If the insured dies within three years after transferring a life insurance policy into an ILIT, federal tax rules may include the policy proceeds in the insured’s estate despite the transfer. This three-year inclusion rule is designed to prevent transfers made shortly before death from removing assets from the estate for tax purposes. As a result, transfers close to the time of death can undermine the intended estate tax advantages of an ILIT. To address this issue, planners often recommend purchasing a policy directly in the ILIT rather than transferring an existing policy close to the time of death, or they advise allowing sufficient time to pass between a transfer and the insured’s death. Evaluating timing and possible alternatives during the planning stage helps minimize the risk that the transfer will be ineffective for estate tax purposes.
An ILIT is generally irrevocable, which means that after it is executed the grantor has limited ability to make unilateral changes to its terms. Some trusts include specific provisions for modification or termination under certain conditions, or the grantor and beneficiaries may use statutory mechanisms to modify a trust in some jurisdictions. Because changes are often difficult, thorough up-front drafting is important to ensure the trust reflects long-term intentions and practical contingencies. If circumstances change significantly, options such as decanting, trust amendment by consent, or court-approved modifications may be available in specific situations, depending on state law and trust language. Consulting about potential future changes during the drafting stage can provide flexibility where permitted and reduce the likelihood of disputes or unintended outcomes down the road.
To begin creating an ILIT in Exeter, contact the Law Offices of Robert P. Bergman for an initial consultation to review your insurance policies, estate plan, and objectives. During this conversation, we gather relevant information about existing policies, family relationships, and financial priorities to determine whether an ILIT fits within your overall plan. We then outline the recommended structure, funding approach, and trustee guidance tailored to your situation. If you decide to proceed, we draft the trust document, coordinate with insurance carriers on ownership and beneficiary changes, and advise on premium funding and beneficiary notices. We also provide administrative templates and ongoing support for trustees to ensure the ILIT functions properly when benefits become payable. Call our Exeter office to schedule a consultation and start the planning process.
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