An Irrevocable Life Insurance Trust (ILIT) is an estate planning tool commonly used to hold life insurance policies outside of a grantor’s estate. For residents of Woodville and Tulare County, creating an ILIT can help provide liquidity to pay estate expenses, remove life insurance proceeds from taxable estate calculations, and ensure proceeds are distributed to beneficiaries according to clear instructions. Establishing an ILIT involves transferring ownership of a policy to the trust and naming a trustee to manage premium payments and distributions. Proper funding and administration are essential to achieve the intended tax and probate advantages while avoiding unintended estate inclusion.
Setting up an ILIT requires careful coordination among the grantor, trustee, insurance carrier, and beneficiaries. In California, an appropriately drafted trust and timely transfer of policy ownership are key to keeping proceeds out of the grantor’s estate. Donors often use annual gift tax exclusion contributions to the trust, accompanied by notice to beneficiaries so they can exercise withdrawal rights known as Crummey notices when applicable. Working through these steps in a deliberate manner helps preserve the trust’s benefits, maintain compliance with federal gift tax rules, and protect the intended retirement, legacy, or family wealth transfer objectives over the long term.
An ILIT serves several practical estate planning objectives. It removes life insurance proceeds from the grantor’s taxable estate, which can reduce estate tax exposure and preserve more assets for heirs. The trust can provide immediate liquidity to cover estate taxes, final expenses, and debts so that other estate assets do not need to be sold under pressure. It also provides structured control over distributions, protecting proceeds for younger beneficiaries or those with special needs, and can reduce probate involvement. Used thoughtfully alongside wills and revocable trusts, an ILIT becomes a central component of a cohesive plan designed to transfer wealth predictably and privately.
Law Offices of Robert P. Bergman serves clients across Tulare County and greater California from San Jose, offering practical estate planning services that include trusts, wills, and life insurance planning. Our approach focuses on clear communication, careful document drafting, and coordinating the administrative steps needed to fund and maintain an ILIT. We work with clients to analyze family circumstances, insurance policy details, and tax considerations to design a trust tailored to their goals. We also assist with related documents like pour-over wills, powers of attorney, and health care directives to create an integrated plan that reflects each client’s priorities and family dynamics.
An ILIT is a separate legal entity created to own and control life insurance policies while removing those proceeds from the insured’s taxable estate. The grantor funds the trust through gifts used to pay premiums, and the trustee holds the policy and manages distributions to named beneficiaries. Because the trust is irrevocable, the grantor relinquishes ownership and certain powers over the policy, which is fundamental to achieving the intended estate and tax treatment. Establishing an ILIT requires attention to timing and documentation so that transfers are effective and consistent with federal and California law governing gifts, trusts, and estate taxation.
Key administrative details include naming a reliable trustee, designating beneficiaries, and ensuring the trust instrument and ownership records at the insurance company reflect the trust as owner and beneficiary. The trust must also include provisions for premium funding, beneficiary distributions, and trustee powers tailored to the grantor’s wishes. In many cases, grantors make annual contributions to the trust that qualify for the gift tax annual exclusion to cover premium payments. Proper use of notices and trust language can help satisfy IRS expectations for Crummey withdrawal rights, which support the intended tax treatment of those gifts.
An Irrevocable Life Insurance Trust is a trust that, once created and funded, owns life insurance policies on the grantor. The trust terms typically direct the trustee how to use insurance proceeds after the insured’s death. Because the trust holds ownership and beneficiary status, proceeds generally bypass probate and do not form part of the grantor’s estate for estate tax purposes, provided transfers were made outside the look-back period and other rules are followed. The irrevocable nature means the grantor cannot unilaterally reclaim the policy or control trust assets, so initial planning and drafting must be deliberate to achieve desired outcomes.
Creating and maintaining an ILIT involves several interrelated elements: drafting the trust instrument with clear beneficiary and distribution provisions; transferring ownership of an existing policy or arranging for a new policy to be owned by the trust; establishing funding mechanisms such as annual gifts or trustee-directed premium payments; and handling beneficiary notices and Crummey withdrawal rights when applicable. Trustees must keep records, coordinate with the insurer, and manage any investments or distributions. Periodic review is important to address changes in tax law, family circumstances, and policy performance to ensure the ILIT continues to serve its purpose.
Understanding common terms helps demystify how an ILIT functions. Definitions vary in nuance, and precise language in the trust document matters. Beneficiary designations, trustee powers, Crummey withdrawal rights, grantor transfers, and the look-back period all shape the trust’s tax and administrative outcomes. Reviewing a clear glossary alongside your documents helps ensure that the parties involved—grantor, trustee, beneficiaries, and carrier—understand responsibilities and expectations. Accurate terminology helps avoid misunderstandings that can compromise the trust’s intended benefits, so careful drafting and explanation are an essential part of the planning process.
Crummey withdrawal rights refer to a temporary right given to trust beneficiaries to withdraw gifts made to the trust for a limited period. This mechanism is often used so contributions intended to cover trust-held life insurance premiums qualify for the annual gift tax exclusion. The trust must provide beneficiaries a real opportunity to withdraw funds and the trustee must provide notice describing the withdrawal right. Properly documented Crummey provisions and notices help establish that gifts are present interests for gift tax purposes, supporting the intended tax treatment of premium funding over time.
The grantor is the person who establishes the ILIT and transfers ownership of the insurance policy into the trust. Once transferred, the grantor typically cannot control trust assets in ways that would defeat the trust’s intended estate treatment. The trustee is the individual or entity that manages the trust, pays premiums from trust funds, handles communications with the insurer and beneficiaries, and makes distributions according to the trust terms. Choosing a trustee who can carry out administrative duties, keep accurate records, and make impartial decisions is vital for effective trust administration.
The look-back period, often referenced in ILIT planning, generally refers to the three-year rule applicable in certain circumstances where transfers of ownership of life insurance policies may still be included in the grantor’s estate for federal estate tax purposes. If the insured transfers an existing policy to an ILIT within that period before death, proceeds may be includable in the estate. Planning around this timing, including purchasing a new policy or transferring earlier, is a common consideration to preserve the intended estate tax benefits of the ILIT.
A pour-over will is often used in conjunction with trusts to ensure that any assets not transferred into a trust during the grantor’s lifetime are directed into the trust at death. In ILIT planning, an overall estate plan may include a pour-over will, revocable living trust, and specific trust provisions to coordinate how assets, including life insurance proceeds and other accounts, are handled. Coordination among these documents helps preserve privacy, reduce probate exposure, and ensure distributions reflect the grantor’s wishes in the event some assets were not retitled prior to death.
When considering life insurance within an estate plan, several options are available. Keeping a policy in the grantor’s name provides simplicity but may include the proceeds in the estate for tax purposes. Naming beneficiaries directly may avoid probate but still exposes proceeds to estate inclusion. An ILIT adds complexity but can offer significant benefits by removing proceeds from the estate and enabling structured distributions. The right choice depends on family goals, tax exposure, policy size, and willingness to give up ownership control. A careful comparison of administrative steps, costs, and long-term objectives helps determine the best path.
A limited approach to life insurance planning may be suitable when the policy’s face value is modest relative to the grantor’s overall estate and estate tax exposure is low. In such situations, administrative burdens of forming and maintaining a trust may outweigh potential benefits. Simple beneficiary designations or account titling strategies can achieve a straightforward transfer to heirs without the added paperwork of trust administration. It remains important to confirm the strategy aligns with other estate documents and family circumstances so proceeds are distributed as intended without unnecessary complexity.
A limited approach may also be appropriate when the need for life insurance protection is temporary, such as covering a specific loan or short-term obligation. In such cases, maintaining an individual-owned policy with clear beneficiary designations can be more practical and less costly than an ILIT. If circumstances change, the estate plan can be revisited to determine whether a more formal trust arrangement makes sense later. Regular review ensures that as financial situations evolve, planning tools remain aligned with the client’s goals and obligations.
When life insurance proceeds are substantial relative to the overall estate, the potential tax and liquidity consequences become more significant. A comprehensive planning process addresses policy ownership, funding strategies, gift tax implications, and trustee selection to reduce estate inclusion risk and provide for orderly distribution. Comprehensive planning also anticipates potential issues such as creditor claims, blended family situations, and beneficiary protections. Thoughtful drafting and coordination with other estate documents help ensure the trust functions as intended and supports long-term legacy goals without creating unintended tax or administrative burdens.
Families with complex dynamics, beneficiaries who may need protection, or significant retirement assets often benefit from a comprehensive approach. An ILIT, coordinated with revocable trusts, powers of attorney, and health directives, can protect the family’s financial security and ensure that insurance proceeds serve their intended purpose. Comprehensive planning addresses contingencies such as beneficiary incapacity, minor beneficiaries, and potential disputes. Detailed trust provisions and clear administrative procedures reduce the likelihood of conflict and provide a roadmap for trustees to follow during emotional and difficult times.
A comprehensive ILIT strategy reduces uncertainty and aligns trust provisions with broader estate goals. By coordinating trust drafting, insurance policy ownership, premium funding mechanisms, and beneficiary protections, the plan can maximize the intended tax and probate advantages while ensuring practical administration. This approach also incorporates contingency planning, such as successor trustee appointments, guidelines for distributions, and instructions for dealing with policy lapses or replacements. Holistic planning promotes continuity, protects family interests, and can prevent costly disputes or corrective actions later.
Another benefit of a comprehensive strategy is improved coordination with other estate planning tools such as revocable living trusts, wills, and powers of attorney. Ensuring these documents work together minimizes gaps and produces predictable outcomes at the time of death or incapacity. The approach also supports clearer communication to trustees and beneficiaries about their roles and expectations. When documents are drafted cohesively and funded properly, families gain greater confidence that life insurance proceeds will be available when needed and distributed according to the grantor’s intentions.
One of the primary benefits of placing a life insurance policy in an ILIT is the potential to preserve wealth for future generations by keeping proceeds out of the taxable estate. When structured correctly and funded properly, the trust proceeds can provide heirs with liquidity that shields other estate assets from forced sale to satisfy obligations. This preservation effect can reinforce a family’s long-term financial goals and facilitate smoother transitions between generations, ensuring that the grantor’s intentions for legacy and support are more likely to be honored.
An ILIT allows the grantor to establish clear distribution guidelines that protect beneficiaries from creditors, poor spending decisions, or unforeseen life events. Trust provisions can stagger distributions, set conditions for releases of funds, or provide income for care while preserving principal for long-term needs. These protections can be particularly important for beneficiaries with special needs, young heirs, or those who require oversight. Thoughtful drafting gives trustees discretion to administer proceeds responsibly while following the grantor’s overall objectives for family support and legacy preservation.
One of the most important initial steps is confirming the insurance company’s records reflect the ILIT as the owner and, where appropriate, the trust as the primary beneficiary. Discrepancies between the trust document and insurer records can undermine the trust’s intended benefits. Keep copies of all ownership change forms, beneficiary designations, and correspondence with the carrier. Periodically verify carrier records, especially after any life changes, to ensure that the trust continues to be owner and beneficiary as designed and that premium payment arrangements remain in effect.
Estate plans, insurance needs, and family circumstances evolve over time. Schedule periodic reviews of the ILIT and related estate documents to confirm that policy coverage remains appropriate, trust provisions still reflect your intentions, and funding mechanisms are effective. Coordinate the ILIT with revocable trusts, wills, and powers of attorney so that beneficiary and asset transfer plans are consistent. Regular review reduces the risk of unintended consequences and ensures that the plan continues to meet your goals as laws, policy values, and family needs change.
You might consider an ILIT if you want to reduce estate tax exposure, provide immediate liquidity for estate obligations, or protect life insurance proceeds from probate and creditor claims. An ILIT is often chosen by those who wish to leave a structured legacy, support family members over time, or preserve other assets from forced sale. It is also useful when coordinating business succession plans or ensuring that insurance proceeds help maintain a surviving spouse’s or dependent’s financial security according to specific guidelines laid out in the trust instrument.
An ILIT can also be appropriate when life insurance is large enough to materially affect estate tax calculations or when beneficiaries need protection from their creditors or from spending decisions. Families with blended relationships, beneficiaries with special needs, or those seeking to make tax-efficient transfers find that an ILIT, properly administered, can address multiple objectives at once. Considering an ILIT often involves weighing upfront administrative commitments against long-term advantages for preserving wealth and directing distributions in a controlled manner.
Common circumstances that lead families to consider an ILIT include having a life insurance policy large enough to affect estate tax exposure, needing funds to cover estate taxes or debts, wanting to protect beneficiaries from creditors or imprudent spending, and coordinating benefits for a surviving spouse or dependent. Business owners frequently use ILITs as part of succession planning to provide liquidity for buy-sell agreements. Additionally, families with special needs beneficiaries or those seeking to create a multigenerational legacy often rely on trust structures to preserve wealth while controlling distributions and protections over time.
When a life insurance policy’s face amount is significant relative to the overall estate, an ILIT can prevent those proceeds from being counted in estate tax calculations, provided transfers and ownership are properly planned. This preserves assets for heirs and reduces the risk that other estate property will need to be sold to satisfy tax liabilities. Individuals with sizable policies should evaluate whether placing the policy in an ILIT aligns with their broader estate goals and consider timing and funding strategies to achieve the desired tax treatment and distribution objectives.
An ILIT can provide immediate liquidity to settle estate expenses such as taxes, debts, and final costs, preventing the need to sell illiquid assets quickly. This is especially useful for estates with significant real estate, business interests, or retirement accounts that might be burdensome to liquidate. By preserving other assets and ensuring quick access to funds, the ILIT helps heirs maintain economic stability and supports orderly administration of the estate in the period following the grantor’s death.
Trust-based distribution rules can limit direct beneficiary access to large lump sums and instead provide income or staggered distributions to protect against creditor claims or impulsive spending. For heirs with special needs or those who may face financial vulnerabilities, the ILIT can be drafted to provide controlled benefits while preserving eligibility for public assistance programs. These protections help ensure insurance proceeds fulfill their intended purpose, providing financial security for beneficiaries while guarding against outcomes that could erode long-term family assets.
Law Offices of Robert P. Bergman provides guidance to residents of Woodville and surrounding Tulare County communities on ILIT planning and related estate matters. Our office assists with drafting trust documents, coordinating insurance transfers, advising on gift and estate tax considerations, and preparing related estate planning instruments. We aim to help clients understand the steps involved and the ongoing administration required so that the ILIT functions as intended. Our goal is to deliver accessible legal services that help families achieve orderly, tax-aware transfers of life insurance benefits to intended beneficiaries.
Clients choose our office because we emphasize clear communication, careful document drafting, and attention to administrative detail. We help clients evaluate whether an ILIT fits their estate goals and explain alternatives in plain language. Our process includes reviewing insurance policies, drafting trust provisions that reflect specific family needs, and assisting with funding and ongoing administration. We aim to provide practical strategies that focus on predictable outcomes and minimize surprises for trustees and beneficiaries during emotionally charged periods.
We also assist with coordinating the ILIT alongside revocable trusts, wills, powers of attorney, and health care directives so that the entire estate plan operates cohesively. Our approach includes explaining the tax and procedural implications of different funding strategies and helping clients implement annual funding practices and beneficiary notices when appropriate. This coordination reduces the risk of gaps in planning and helps create a smoother transition for your family while preserving the intended benefits of the life insurance trust.
Our office serves clients throughout Tulare County and California, providing hands-on guidance and timely follow-up on administrative items such as ownership change forms, premium funding, and trustee reporting. We tailor trust provisions to align with each client’s goals, whether preserving estate value, providing for family members, or addressing specific concerns like blended families or special needs. By focusing on practical, actionable planning steps, we help clients achieve clarity and confidence in how life insurance proceeds will be handled over time.
Our process begins with a consultation to understand your family situation, existing policies, and planning objectives. We review policy documents, discuss funding options, and analyze potential tax and timing considerations. Next we draft the trust instrument tailored to your needs, coordinate the transfer or issuance of the policy in the name of the trust, and prepare any necessary notices for beneficiaries. Finally, we provide guidance on ongoing administration, recordkeeping, and periodic reviews so that the trust continues to reflect your intentions as circumstances change.
The initial review focuses on understanding your objectives, insurance details, and family dynamics. We examine existing policy ownership, beneficiary designations, and any relevant estate documents to identify the best path forward. This stage includes explaining the implications of transferring an existing policy versus issuing a new policy owned by the trust, and the timing considerations that affect estate inclusion. We also discuss funding strategies such as annual gifting and how they align with your overall financial and estate goals.
We thoroughly review policy contracts, ownership records, and beneficiary designations to determine whether a transfer to an ILIT is appropriate. This assessment identifies any look-back issues, surrender values, premium schedules, and carrier requirements for ownership changes. Understanding these details helps determine whether to transfer an existing policy or to purchase a new policy titled in the trust. The review also identifies potential administrative steps the trustee will need to manage to maintain coverage and achieve the trust’s intended benefits.
During planning, we clarify the grantor’s goals for liquidity, tax planning, and beneficiary protections, and map out practical funding options to support premium payments. We evaluate whether annual gift exclusion contributions, trust investments, or other arrangements best support the policy’s premiums. This part of the process also addresses who will serve as trustee and how distributions should be structured to meet the grantor’s objectives, balancing tax considerations with practical administration and family needs.
After planning, we draft the ILIT document tailored to the objectives and funding strategy. The trust instrument sets forth trustee powers, beneficiary distribution rules, Crummey provisions when applicable, and procedures for premium funding and replacement policies. We coordinate execution of the trust, ownership transfer forms with the insurer, and beneficiary notices. Proper execution and clear instructions are essential to preserve intended tax treatment and to provide trustees with the authority and guidance they need to administer the trust effectively.
Trust drafting addresses how proceeds are to be used, trustee discretion in managing funds, successor trustee appointments, and contingencies for policy lapse or replacement. The document should provide sufficient trustee powers to pay premiums, invest trust assets, and make distributions while imposing limits that preserve protections for beneficiaries. Clear language reduces ambiguity and helps prevent disputes. We tailor these provisions to reflect the grantor’s preferences for control, protection, and flexibility within the confines of an irrevocable structure.
Once the trust is executed, we work with the insurer to change policy ownership and beneficiary designations to the ILIT. We prepare and send beneficiary notices required for Crummey withdrawal rights when the plan relies on annual gift exclusions. Ensuring the carrier’s records match the trust document is a critical administrative step. At this stage, trustees receive guidance on recordkeeping and communications to satisfy both contractual and tax-related requirements associated with the trust and the policy it owns.
After execution, ongoing administration ensures the ILIT remains effective. Trustees must make premium payments, maintain accurate records, provide required notices, and carry out distribution instructions. Grantors should plan for regular funding contributions or other mechanisms to prevent lapses. Periodic review addresses changes in tax laws, family circumstances, or policy performance, and helps determine whether adjustments or successor documents are needed. Consistent administration secures the trust’s benefits and ensures proceeds are available when beneficiaries require them.
Trustees should document all gifts, premium payments, notices, and communications with the insurer to create a clear administrative trail. If funding is via annual exclusion gifts, retain evidence of beneficiary notices and any formal responses. Accurate records help support the trust’s tax posture and simplify reporting. Trustees should also track policy performance, premium schedules, and any corporate actions by the insurer that could affect coverage, and notify the grantor or beneficiaries if changes require further planning action.
Periodic reviews help ensure the ILIT continues to align with the grantor’s goals and current law. Reviews typically examine policy values, funding adequacy, beneficiary circumstances, and potential tax law changes that could affect planning outcomes. If needed, modifications to related estate documents, retiree plans, or funding approaches can be undertaken to maintain consistency. Regular review helps anticipate issues before they arise, allowing trustees and families to take corrective measures that preserve the trust’s intended benefits.
An Irrevocable Life Insurance Trust is a trust that owns a life insurance policy and is designed to keep the policy’s death benefit outside of the grantor’s taxable estate. The trust becomes the policy owner and beneficiary, and the trustee manages premium payments and distributions according to the trust terms. Because the trust is irrevocable, the grantor gives up certain ownership rights over the policy, which is how the proceeds can remain outside the estate for estate tax purposes when the trust is properly funded and administered. People use an ILIT to provide liquidity, reduce estate tax exposure, and create structured distributions for heirs. It also allows for planning around beneficiary protections and can complement other estate planning devices such as revocable trusts and pour-over wills. While an ILIT adds administrative steps, it can provide valuable benefits for families whose life insurance proceeds would otherwise be subject to estate inclusion or probate hassles.
Funding an ILIT commonly involves the grantor making annual gifts to the trust to cover insurance premium payments, often structured to qualify for the federal gift tax annual exclusion. When beneficiaries are given a temporary right to withdraw the contributed funds, known as Crummey withdrawal rights, those gifts can be treated as present interest gifts and qualify for the exclusion. Trustees must document the gifts and any notices provided to beneficiaries to support the tax treatment and to show that funds were used to pay premiums. It is important to time gifts and notices carefully and to maintain clear records of contributions and payments. Funding strategies can include consistent annual gifts, larger lump-sum contributions, or trust investments designed to produce income for premiums. Each approach has implications for taxes, administration, and long-term trust performance, so planning should reflect the grantor’s financial capacity and the trust’s objectives.
Yes. Transferring a policy to an ILIT typically means the grantor relinquishes ownership and certain powers over the policy. That loss of control is necessary to achieve the intended tax and probate benefits, since continued beneficial ownership or retained powers could cause the policy proceeds to be included in the grantor’s estate. Once transferred, the trustee manages the policy and follows the trust instructions for premium payments and distributions. Because ownership changes are permanent under the ILIT structure, selecting the right trustee and carefully drafting the trust terms at the outset is important. The grantor should plan for contingencies, such as policy replacement or lapse, and provide guidance in the trust document about how trustees should handle these situations while preserving the grantor’s objectives.
Crummey notices are communications sent to trust beneficiaries informing them of a temporary right to withdraw a gift made to the trust. This mechanism is used so that gifts intended to pay premiums can qualify for the annual gift tax exclusion by being treated as present interest gifts. For the notice to be effective, beneficiaries should be given a meaningful, albeit temporary, opportunity to withdraw the funds, and trustees should document notices and any beneficiary responses. While Crummey notices are commonly used to preserve tax treatment, their implementation must follow the trust terms and applicable tax guidance. Properly drafted notices and trust provisions help support the intended gift tax treatment, and trustees should keep records to demonstrate that notices were provided and that funds were used to pay premiums.
An ILIT can provide a layer of protection that may shield life insurance proceeds from certain creditor claims or from being readily accessible in a divorce settlement of a beneficiary. Because the trust controls distributions, proceeds are not automatically paid directly to beneficiaries where they might be vulnerable to claims. Trust provisions can limit direct access and set conditions or staggered distributions to protect assets for long-term benefit. The degree of protection depends on trust drafting and applicable law, including state-specific rules about creditor rights and divorce proceedings. While an ILIT can be a strong tool for beneficiary protection, it should be considered as part of a broader plan tailored to family circumstances and potential legal exposures to ensure the desired level of protection is achieved.
An ILIT typically functions alongside revocable living trusts and wills as part of a coordinated estate plan. While a revocable trust manages assets that the grantor retains control over during life, the ILIT owns life insurance policies and operates independently to achieve specific tax and distribution objectives. A pour-over will can be used to direct any assets not properly retitled into a revocable trust at death, but the ILIT remains a separate vehicle specifically designed for insurance proceeds. Coordination among these documents is important to ensure consistent beneficiary designations and distribution instructions. Reviewing the entire estate plan together prevents conflicts or gaps that could undermine the intended outcomes, such as mismatched beneficiary designations or untitled assets that create unintended probate exposure.
If premium payments stop or a policy lapses, the trust may lose the benefits it was intended to provide, and the death benefit may be reduced or eliminated. Trustees should monitor premium schedules and trust funding to avoid lapses, and contingency provisions in the trust can direct actions such as allowing the trustee to replace the policy, use trust funds for premiums, or convert the policy to a reduced paid-up status if appropriate. Open communication between grantor and trustee about funding expectations helps maintain coverage. Immediate steps after a premium lapse may include contacting the insurer to learn options for reinstatement, converting the policy, or evaluating replacement policies. Trustees should keep beneficiaries informed and document decisions. Timely administration and planning for funding contingencies reduce the risk of losing coverage and preserve the trust’s intended purpose.
Yes. Timing matters. If a grantor transfers ownership of an existing life insurance policy to an ILIT within a limited look-back period before death, the proceeds may still be included in the grantor’s estate for federal estate tax purposes. This timing rule encourages advance planning and can influence decisions about whether to transfer an existing policy or to obtain new coverage in the name of the trust. The timing and facts around transfers should be reviewed carefully to avoid unintentional estate inclusion. Planning ahead can mitigate timing risks by transferring ownership well before the look-back period or by issuing a new policy in the trust’s name. Each option has trade-offs related to underwriting, surrender values, and administrative complexity, so the right choice depends on the grantor’s goals and circumstances. Early planning helps ensure the ILIT achieves the intended estate and tax benefits.
A trustee should be someone or an entity capable of managing administrative duties, paying premiums, keeping accurate records, and making impartial distribution decisions consistent with the trust terms. Trustees can be a trusted family member, a close advisor, or a corporate trustee depending on the complexity of the trust and the family circumstances. The trustee’s role includes liaising with the insurer, handling funding from the grantor, issuing beneficiary notices when required, and administering distributions according to the document. Selecting and documenting successor trustees is important to ensure continuity. The trust should provide clear guidance about trustee responsibilities, compensation, and procedures for handling conflicts of interest. Trustees should also maintain communication with beneficiaries and seek professional assistance when complex tax or administrative questions arise.
Reviewing an ILIT and related estate documents should occur periodically and after major life events such as marriage, divorce, births, deaths, changes in financial circumstances, or significant changes to tax law. Regular reviews, often every few years or when circumstances change, help confirm that policy ownership, funding, and trust provisions remain aligned with the grantor’s objectives. These reviews also allow for updating related estate planning documents to maintain consistency across the plan. During a review, consider changes in policy performance, funding ability, beneficiary needs, and tax law. Trustees and grantors should verify insurer records, confirm beneficiary information, and ensure that funding mechanisms remain viable. Timely reviews reduce the risk of unintended consequences and help maintain the ILIT’s effectiveness over time.
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