An Irrevocable Life Insurance Trust (ILIT) can be an effective estate planning vehicle for families in Terra Bella seeking to manage life insurance proceeds outside of a taxable estate and to provide for beneficiaries according to specific wishes. This page explains how an ILIT functions, who commonly uses one, and what outcomes it can help achieve. At the Law Offices of Robert P. Bergman we focus on clear planning options for clients in Tulare County, helping them understand how an ILIT interacts with other estate documents such as revocable living trusts, pour-over wills, and powers of attorney.
Deciding whether an ILIT is appropriate depends on family circumstances, financial goals, and the types of assets you wish to protect or direct. An ILIT can remove life insurance proceeds from an estate for federal estate tax purposes and create a controlled distribution mechanism for beneficiaries. This guide outlines basic structure, operational considerations, and planning alternatives so you can make informed decisions. We also describe how an ILIT coordinates with common estate planning instruments like advance health care directives and guardianship nominations for comprehensive legacy planning in California.
An ILIT provides several practical benefits when incorporated thoughtfully into an estate plan. It can remove life insurance proceeds from an insured person’s taxable estate, helping to protect the value of the estate for heirs and potentially reducing estate tax exposure. An ILIT also allows the grantor to set terms for distribution, appoint trustees to manage proceeds, and include safeguards for beneficiaries who may need structured distributions. For families with retirement plan trusts, special needs considerations, or blended family dynamics, the ILIT adds a layer of control and predictability that complements other planning documents like pour-over wills and trust modification petitions.
The Law Offices of Robert P. Bergman serve individuals and families across California from our San Jose base and provide estate planning services tailored to local needs. Our approach emphasizes clear communication, personalized drafting, and practical administration planning to ensure that documents such as revocable living trusts, general assignments of assets to trust, and irrevocable life insurance trusts reflect clients’ goals. We work with clients to coordinate beneficiary designations, retirement plan trusts, and ancillary documents like HIPAA authorizations so that insurance proceeds integrate smoothly with broader estate plans for peace of mind and orderly transfer of assets.
An Irrevocable Life Insurance Trust is a separate legal entity that owns a life insurance policy on the grantor or holds policy proceeds after the insured’s death. The trust document names trustees who manage the proceeds for beneficiaries according to the terms set by the grantor. Once established and funded, the grantor generally cannot regain ownership of the policy without creating tax or legal consequences. For many clients in Terra Bella, the ILIT is part of a larger plan that includes a revocable living trust, a pour-over will, and other instruments designed to protect family wealth and meet long-term distribution goals.
Operationally, an ILIT may purchase a life insurance policy or receive the proceeds of an existing policy. Premiums can be paid by the grantor to the trust through gifts or other funding mechanisms, and trustees manage the policy and proceeds. Careful drafting addresses issues such as Crummey notices for gift taxation, successor trustee appointments, and distribution standards for beneficiaries. Coordination with financial advisors and retirement plan trustees ensures consistent beneficiary designations and avoids unintended taxable consequences or probate exposure for insurance proceeds.
An Irrevocable Life Insurance Trust is a trust that becomes the owner and beneficiary of a life insurance policy, or holds the policy proceeds upon death, and it is set up so that the policy and proceeds are not included in the insured’s gross estate for federal estate tax purposes. The grantor transfers ownership and certain controls to the trust, which is then administered by trustees who follow the grantor’s directions regarding use of proceeds, such as paying debts, providing for minors, or funding long-term care. Properly structured, an ILIT supports orderly transfers outside probate and can be tailored to family circumstances and tax considerations.
Key elements of an ILIT include the trust instrument, designation of trustees and beneficiaries, funding plan for premiums, and provisions for distributions after the insured’s death. Administration processes require trustees to manage the policy, maintain records, provide notice when trust-held policies are purchased or premiums are due, and distribute proceeds according to the trust’s terms. Trustees must also follow tax reporting rules and coordinate with beneficiaries and financial institutions. Common ancillary documents such as certification of trust and general assignment of assets to trust may be used to demonstrate the trust’s authority to third parties.
Understanding common terms helps clients make informed decisions when creating an ILIT. Definitions range from grantor and trustee roles to terms such as Crummey power, pour-over will, and Heggstad petition. This section provides concise explanations to clarify how each element affects ownership, taxation, and beneficiary rights. Clear terminology ensures coordination among estate planning documents, beneficiary designations, and any related petitions, such as trust modification petitions or Heggstad petitions when assets must be transferred to an existing trust after death.
The grantor is the person who creates the trust and transfers an insurance policy or funding to it. In an ILIT, the grantor relinquishes ownership of the policy to the trust so that proceeds are generally excluded from the grantor’s taxable estate. The grantor may also provide guidance within the trust document about how proceeds should be used, name trustees and beneficiaries, and set conditions for distributions. Once the trust is irrevocable, the grantor’s ability to change terms is limited, so careful planning and coordination with other estate documents are important.
A trustee is the person or institution appointed to manage the trust’s assets, including life insurance policies and proceeds. The trustee has fiduciary duties to administer the trust according to its terms and applicable law. Duties include managing premiums, filing necessary tax returns, keeping accurate records, and distributing proceeds to beneficiaries in a manner consistent with the grantor’s directions. The trustee’s role is important for maintaining continuity and ensuring that trust assets are handled responsibly for the long-term benefit of beneficiaries.
A Crummey power is a provision that allows trust beneficiaries a temporary right to withdraw gifted funds, which can qualify premium contributions to an ILIT as present interest gifts for gift tax annual exclusion purposes. When properly executed, the Crummey notice process helps the grantor use annual gift tax exclusions to fund premiums without creating a taxable gift. Trustees must give timely notice to beneficiaries about their withdrawal rights and follow procedural steps to secure the desired tax treatment while retaining long-term control of trust assets.
A pour-over will is a will designed to transfer any assets not already held in the trust into the trust upon the testator’s death. For clients who maintain a revocable living trust alongside an ILIT, a pour-over will serves as a safety net to capture stray assets and ensure they ultimately receive the intended trust administration and distribution. While assets passing under a pour-over will may still go through probate, they are then managed under the terms of the trust for consistency with the overall estate plan.
When evaluating an ILIT alongside alternatives, consider the objectives, tax consequences, and administrative commitments of each option. A revocable living trust offers flexibility and control during the grantor’s life but does not remove assets from the taxable estate. Beneficiary designations on life insurance may be simplest but lack the protective structure of a trust. An ILIT provides ownership separation and distribution control but involves relinquishing ownership and adhering to gifting and notice procedures. A balanced plan often combines several documents to achieve both flexibility and asset protection for beneficiaries.
For some families, a straightforward beneficiary designation on a life insurance policy may meet planning objectives when policy proceeds are modest and beneficiary relationships are clear and uncomplicated. In situations where the insured’s estate is not near federal estate tax thresholds and there are no concerns about creditor claims or beneficiary vulnerabilities, keeping the policy payable directly to a spouse or child can simplify administration. This approach reduces the need for trustee oversight and administrative notices, allowing proceeds to pass quickly to intended recipients without the formality of trust administration.
If an individual already has a comprehensive estate plan structured to minimize tax exposure and protect assets, adding an ILIT may provide limited additional benefit. For clients whose combined assets fall well below relevant exclusion thresholds and who face no significant creditor or creditor-protection concerns, maintaining life insurance outside of a trust can reduce paperwork and coordination tasks. This path may suit those prioritizing simplicity, provided continuity and beneficiary designations are reviewed regularly and aligned with the overall plan.
When estates approach exclusion thresholds or family dynamics include blended families, minor beneficiaries, or individuals with special needs, a comprehensive approach becomes more important. An ILIT integrated with a revocable living trust, retirement plan trust, and designated guardianship nominations can protect assets, provide structured distributions, and reduce the likelihood of disputes. Thorough planning addresses tax consequences, beneficiary protections, and the practical administration of insurance proceeds so that the grantor’s intentions are carried out with appropriate oversight and continuity.
Clients seeking to preserve estate value for future generations often benefit from integrated planning that uses an ILIT along with other trusts and documents. The ILIT helps remove insurance proceeds from the grantor’s estate, while revocable trusts, retirement plan trusts, and specific provisions such as irrevocable life insurance trusts work together to minimize tax exposure, provide creditor protection where permitted, and manage distribution timing. Coordinating these elements ensures consistent beneficiary designations and reduces the risk of conflicting instructions across multiple documents.
A comprehensive plan that includes an ILIT can deliver greater predictability and cohesion across multiple documents. By aligning beneficiary designations, trust provisions, and ancillary documents such as HIPAA authorizations and powers of attorney, clients achieve a more coordinated outcome. This reduces the potential for probate surprises, competing creditor claims, and unintended distributions. Clear trustee appointment and administrative instructions enhance continuity of management and help ensure proceeds are used for intended purposes like paying debts, providing for dependents, or funding long-term needs.
In addition to tax and distribution benefits, comprehensive planning supports practical administration and family communication. When trustees are nominated and given concrete guidelines, beneficiaries understand how and when funds will be distributed. Integrating an ILIT into a broader plan also allows for contingencies like modifications through trust modification petitions where permissible and alignment with supervening documents such as a pour-over will. This level of structure helps families avoid surprises and provides a roadmap for trustees and loved ones to follow after a settlor’s death.
An ILIT can be used to provide liquidity to pay estate taxes or other obligations without forcing the sale of family assets. By holding life insurance proceeds outside of the grantor’s estate, proceeds become available to satisfy tax liabilities or other immediate needs, protecting real estate, business interests, or investments from forced liquidation. When combined with other trusts and careful beneficiary designation, this strategy enhances the ability of an estate to meet obligations while preserving legacy assets for intended beneficiaries.
An ILIT allows grantors to tailor distribution rules to suit beneficiaries’ needs, such as staggered payments, incentives tied to milestones, or outright distributions under specified circumstances. This level of control helps guard against imprudent spending and provides ongoing support where needed. The trust structure can include provisions to protect beneficiaries from creditors or from losing eligibility for public benefits, when appropriate, by routing funds through specialized trusts like special needs trusts. Thoughtful drafting ensures a balance between support and accountability for beneficiaries.
Begin ILIT planning by clarifying your goals for the policy proceeds, whether to provide liquidity, protect an inheritance, or support specific beneficiaries over time. Documenting intended outcomes helps shape trust terms, funding strategies, and trustee selection. Consider how the ILIT will interact with existing estate documents like revocable living trusts, pour-over wills, and beneficiary designations on retirement accounts. Early coordination reduces the likelihood of conflicting directions and ensures that an ILIT supports broader legacy planning without creating administrative complications or gaps in coverage.
Selecting trustees and naming successor trustees is an important planning decision that shapes how the trust will be administered over time. Choose individuals or institutions who are reliable, organized, and comfortable with fiduciary duties. Include clear guidance for trustee compensation, decision-making authority, and procedures for dispute resolution or successor appointment. Naming trusted successors and providing alternate choices helps ensure continuity if a trustee cannot serve, and it reduces friction during the administration of insurance proceeds for beneficiaries.
People choose an ILIT for a variety of reasons including preserving estate value for heirs, providing liquidity for estate taxes or debts, and creating controlled distributions for beneficiaries who may need oversight. An ILIT can be especially beneficial in blended families, where the grantor wishes to protect an inheritance for children from a prior marriage while also providing for a surviving spouse. It can also insulate proceeds from claims against the estate when allowed by law and provide structured financial support for minors or other dependent beneficiaries.
Another common reason is to coordinate life insurance with retirement plans and other assets so that estate settlement proceeds are predictable and manageable. Individuals who are concerned about unintended probate exposure or who want to ensure orderly management of insurance proceeds frequently use ILITs along with revocable living trusts, pour-over wills, and powers of attorney to create a comprehensive plan. The ILIT serves as a purposeful vehicle to safeguard proceeds for intended uses rather than allowing automatic distributions without safeguards.
Common circumstances that make an ILIT worth considering include estates with significant life insurance policies, families with minor or vulnerable beneficiaries, those approaching estate tax thresholds, and scenarios where beneficiaries face potential creditor claims. Business owners and individuals with concentrated assets may also use ILITs to provide liquidity without forcing asset sales. When estate planning goals include lifetime gifting strategies, long-term beneficiary protections, or coordination with other trusts, an ILIT can be an important tool in achieving those aims while preserving overall estate plan consistency.
When life insurance policies are substantial relative to the overall estate, placing the policy in an ILIT can prevent the proceeds from increasing the taxable estate and causing greater estate tax liability. An ILIT allows the policy proceeds to be managed and distributed according to plan terms, avoiding unintended inclusion in the estate for tax purposes. Careful funding and gift designation practices ensure that the trust qualifies for intended tax treatment while providing beneficiaries with a reliable source of funds when needed.
When beneficiaries are minors or require long-term care, an ILIT can create tailored distribution schedules or management provisions that protect those beneficiaries and ensure funds are applied for their benefit. The trust can set age-based releases, require educational use, or provide ongoing management for health and support needs. This structure reduces the likelihood that funds will be mismanaged and ensures that trustees have clear authority to act in beneficiaries’ interests while following the grantor’s instructions.
If an estate’s assets are tied up in illiquid holdings such as real property or business interests, life insurance proceeds held in an ILIT can supply the liquidity needed to pay estate taxes, debts, or administrative expenses without forcing the sale of core assets. This approach helps preserve family businesses and long-held property while ensuring the estate meets its financial obligations. The trustee can provide timely funds to settle liabilities and allow other assets to remain intact for beneficiaries.
We assist residents of Terra Bella and surrounding Tulare County communities with estate planning needs, including establishing ILITs, drafting revocable living trusts, preparing pour-over wills, and arranging powers of attorney. Our goal is to make the planning process understandable and manageable by explaining options, coordinating with financial professionals, and producing documents that reflect each client’s preferences. We are available to discuss how an ILIT might integrate with your larger plan, whether you need a simple trust to hold a policy or a layered plan addressing multiple assets and beneficiaries.
Clients turn to our firm for straightforward guidance and careful drafting of trust instruments tailored to their needs. We prioritize clear communication, timely responsiveness, and thorough coordination with other advisors so that documents such as irrevocable life insurance trusts, retirement plan trusts, and advance health care directives work together. Our process begins with a detailed review of existing policies and beneficiary designations, followed by custom drafting and practical administration planning so that trust provisions are implementable and aligned with the client’s goals.
We also focus on anticipating common issues trustees and beneficiaries may face, providing templates for notices, recordkeeping practices, and procedures for successor appointments. This practical orientation reduces administration friction and helps trustees fulfill their responsibilities with confidence. Whether clients seek coordination with investment advisors or assistance in resolving beneficiary questions, we offer guidance to support orderly post-death administration of life insurance proceeds and other estate assets.
Accessibility and client service are core aspects of our approach. We explain the implications of irrevocability, coordinate the necessary gifting and notice mechanics, and review interactions with ancillary documents like HIPAA authorizations and guardianship nominations. For clients in Terra Bella and nearby communities, we aim to provide a clear, actionable plan that protects family objectives while avoiding surprises during administration and settlement.
Our process begins with an initial consultation to gather information about assets, beneficiaries, existing policies, and your objectives for insurance proceeds. We then prepare a draft trust tailored to those goals, addressing funding methods, trustee powers, distribution terms, and notice requirements. After documenting those choices and coordinating with insurance carriers if needed, we finalize the trust and assist in transferring ownership of policies or aligning beneficiary designations. We also provide guidance for trustees on recordkeeping and ongoing administration to ensure the trust is maintained properly.
The first step involves a comprehensive review of your existing estate plan, insurance policies, and family circumstances, along with a discussion of intended outcomes. We gather details about policy ownership, beneficiary designations, and any potential tax or creditor exposure that could affect the plan. This stage helps identify whether an ILIT is appropriate, how it should be funded, and how it interacts with documents like a revocable living trust, pour-over will, or retirement plan trust. Clear objectives guide drafting decisions and trustee selection.
We request copies of current life insurance policies, estate planning documents, and financial statements to understand the full context. Reviewing beneficiary designations and ownership details helps identify potential conflicts or gaps, such as policies with outdated beneficiaries or policies currently owned by the insured rather than a trust. This review informs decisions about transfers, gifting strategies for premium payments, and any required beneficiary updates to ensure the ILIT functions as intended within the broader estate plan.
During goal identification we discuss desired timing and conditions for distributions, liquidity needs, and protections for beneficiaries. Trustee selection is addressed in light of administrative complexity, length of trust administration, and the need for continuity. We provide guidance on naming successor trustees and including procedural provisions to handle trustee resignation or incapacity. These choices shape the trust’s operational structure and help ensure that administration is practical and aligned with your wishes.
Once goals and funding strategies are confirmed, we draft the ILIT instrument and related documents such as certification of trust and funding instructions. The trust language sets trustee powers, distribution standards, and any special provisions for beneficiary needs. After review and any necessary revisions, we execute the trust according to California requirements and assist with the logistical steps to transfer or retitle any life insurance policies. We also prepare sample notice templates and recordkeeping guidance for trustees.
Trust drafting includes clear authority for trustees to hold and manage the policy, receive premium gifts, pay expenses, and make distributions in accordance with the grantor’s goals. Funding instructions clarify whether premiums will be paid by gifts, direct payments, or other arrangements and outline how to use annual gift tax exclusions. If Crummey powers are used, the trust will include notice procedures and timelines so that gift treatment aligns with tax rules while preserving the long-term control the grantor seeks.
After execution, we assist with notifying insurance carriers and ensuring policies are properly assigned to the trust or that beneficiary designations reflect the trust as owner and beneficiary. Coordination with insurance agents or carriers prevents delays and confirms that the trust’s ownership is recognized. We also provide trustees with a certification of trust to facilitate dealings with financial institutions, and we advise on maintaining records of premium gifts, trustee actions, and any beneficiary notices required under the trust terms.
Following trust funding, trustees assume responsibility for premium payments, recordkeeping, beneficiary communications, and tax filings when applicable. We provide guidance and sample procedures to help trustees manage these tasks reliably. Periodic review of the trust in light of changes to family circumstances, tax law, or financial situations is recommended to confirm that the ILIT continues to meet goals and aligns with other estate planning instruments. When changes are needed, options such as trust modification petitions or complementary documents may be considered where permitted.
Trustees should keep detailed records of premium payments, Crummey notices, policy ownership documents, and decisions regarding distributions. Good recordkeeping supports transparency for beneficiaries and simplifies any required tax reporting. Trustees should also follow notice procedures spelled out in the trust, particularly when gifts are made or withdrawal rights are offered to beneficiaries. Consistent administrative practices protect the trust’s integrity and support efficient handling of proceeds when the insured’s death occurs.
Regular reviews with legal and financial advisors help ensure the ILIT remains aligned with changes in family needs, asset values, and applicable laws. Coordination with investment advisors and retirement plan administrators helps prevent conflicting beneficiary designations and assures that the trust continues to serve the grantor’s objectives. When beneficiary circumstances change or a trustee needs to be replaced, well-documented procedures and timely legal counsel facilitate orderly adjustments and reduce the risk of disputes or unintended tax consequences.
An Irrevocable Life Insurance Trust is a trust that owns a life insurance policy or receives the policy proceeds and is structured so that the proceeds are typically not included in the insured’s taxable estate. Grantors create an ILIT to achieve goals such as providing liquidity for estate expenses, protecting inheritances, and controlling how proceeds are distributed to beneficiaries. Because the trust is irrevocable, the grantor generally relinquishes policy ownership and certain powers, which affects how the trust is administered and the tax treatment of proceeds. Selecting an ILIT depends on your overall estate plan, family circumstances, and whether removing the insurance proceeds from your estate aligns with your goals. The trust document names trustees, sets distribution rules, and specifies funding arrangements for premiums. Coordination with other documents like a revocable living trust, pour-over will, and beneficiary designations is important to ensure the ILIT functions as intended and integrates smoothly with your broader planning objectives.
An ILIT can reduce the size of an individual’s taxable estate by ensuring that life insurance proceeds are owned by the trust rather than the insured at death, which can lower estate tax liability when the estate is large enough for it to matter. This exclusion only works when transfers adhere to timing and legal requirements, including the handling of any retained incidents of ownership. Properly structured, the ILIT allows trustees to distribute proceeds according to the grantor’s instructions without increasing the grantor’s estate for tax purposes. Beneficiary distributions from an ILIT are governed by the trust terms, which can provide for immediate distribution, staggered payments, or conditional distributions based on age or need. Trustees carry out these instructions while maintaining records and complying with any tax reporting. Coordination with retirement plan trusts and other beneficiary designations ensures a coherent distribution strategy across different sources of post-death assets.
Existing life insurance policies can often be transferred into an ILIT, but the transfer may have tax and ownership consequences that should be considered. When transferring a policy, timing matters because transfers made within three years of death may be included in the insured’s taxable estate under certain federal rules. It’s important to review policy terms, carrier requirements, and whether any loans or assignments on the policy affect the transfer process before proceeding. We assist clients in coordinating the transfer by preparing assignment documents, updating ownership records with the insurance carrier, and advising on any funding implications for premium payments. If a transfer is not feasible or creates undesirable consequences, alternatives such as changing beneficiary designations or purchasing a new policy owned by the ILIT may be explored and compared for suitability and tax impact.
Crummey notices are communications sent to beneficiaries of a trust informing them of a temporary right to withdraw a contribution to the trust. These notices support treating gifts to the trust as present interest gifts eligible for the annual gift tax exclusion. The notice must give beneficiaries a meaningful period to exercise the withdrawal right, although in most cases beneficiaries do not exercise it, allowing the funds to remain in the trust for long-term management and distribution according to the trust terms. Proper implementation of Crummey powers requires adherence to procedures and documentation, including timely notices and records showing whether withdrawal rights were exercised. Trustees should follow clear notice templates and timelines to ensure gifts qualify for the intended gift tax treatment. We provide guidance and sample notices to help trustees and grantors maintain consistent practices.
Trustees should be individuals or institutions who are organized, reliable, and capable of fulfilling fiduciary duties. When choosing a trustee, consider availability, recordkeeping ability, and willingness to manage insurance policies, notices, premium payments, and distributions. Many clients choose trusted family members, close advisors, or corporate trustees depending on the anticipated complexity of administration and the anticipated duration of trust management. Naming successor trustees is important to ensure continuity if the initial trustee becomes unable or unwilling to serve. Successor trustee provisions should address resignation, incapacity, and removal procedures. Clear instructions on trustee powers, compensation, and decision-making authority help reduce ambiguity and minimize disputes between beneficiaries or interested parties during administration.
Premiums for an ILIT can be funded in multiple ways, including annual gifts from the grantor to the trust, which trustees use to pay premiums. If the grantor intends to use the annual gift tax exclusion, Crummey notices may be required to qualify those gifts as present interest gifts. Alternatively, the trust can be funded by lump-sum gifts or other mechanisms depending on the grantor’s financial circumstances and gifting strategy. Gift tax considerations depend on the size and timing of gifts and whether the grantor uses exclusion amounts or lifetime exemptions. Proper documentation and consistent notice procedures are essential to support the intended tax treatment. We advise clients on gifting options, prepare required notices, and work with tax professionals when necessary to align funding strategies with tax and estate planning goals.
Because an ILIT is labeled irrevocable, modifying its terms after creation can be limited and may have tax or legal consequences. In some circumstances, changes can be made through trust modification procedures if all interested parties consent and state law allows, or by using mechanisms such as decanting or court petitions where applicable. However, any amendment or modification should be carefully evaluated to avoid inadvertent estate inclusion or unintended tax effects. It is therefore important to draft the ILIT with flexibility where reasonable and to plan for contingencies through detailed trustee powers, successor trustee appointments, and provisions addressing changes in beneficiary circumstances. Periodic review may identify needed changes, and when modification is necessary, legal advice helps determine permissible and practical avenues for adjustment.
An ILIT typically operates alongside other estate planning documents, such as a revocable living trust and a pour-over will, each serving complementary roles. The revocable living trust handles assets retained during life and can provide management and distribution instructions for property, while a pour-over will captures assets not previously transferred to trusts. The ILIT specifically deals with one aspect: holding life insurance proceeds in a separate trust to achieve the grantor’s insurance-related objectives. Coordination is important to avoid conflicts between beneficiary designations and trust provisions. For example, a revocable trust may own certain assets, while the ILIT owns life insurance. Ensuring beneficiary designations and trustee powers are aligned across documents reduces the risk of disputes and promotes consistent administration of all estate assets according to the grantor’s broader plan.
After the insured’s death, trustees are responsible for claiming policy proceeds, managing distributions in accordance with the trust document, and maintaining records of how funds are used. Trustees may pay debts or taxes, make distributions to beneficiaries, and invest proceeds prudently within the trust’s terms. Accurate recordkeeping and timely communication with beneficiaries are important to maintain transparency and to fulfill fiduciary obligations. Trustees may also need to coordinate with accountants and tax advisors to address any reporting requirements and to ensure that distributions and expenditures are documented properly. Where the trust funds special needs or retirement plan trusts, trustees should be mindful of public benefits rules and tax implications when making distributions to preserve intended beneficiary advantages.
To begin creating an ILIT, gather information about existing life insurance policies, beneficiary designations, and other estate planning documents such as revocable living trusts and powers of attorney. Schedule a consultation to discuss goals for insurance proceeds, desired distribution structures, and funding strategies for premiums. This preparatory work allows for targeted drafting and helps identify whether transferring an existing policy or purchasing a new policy within the trust is the best approach. During the initial meeting we review options, explain procedures such as Crummey notices for gifting, and outline administrative responsibilities for trustees. If you decide to proceed, we draft and execute trust documents, assist with policy transfers or beneficiary updates, and provide guidance for trustees to maintain records and administer the trust in accordance with your wishes.
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