An Irrevocable Life Insurance Trust (ILIT) is a specialized estate planning tool that many Monument Hills residents use to protect life insurance proceeds, reduce potential estate tax exposure, and ensure a smooth transfer of benefits to intended beneficiaries. At the Law Offices of Robert P. Bergman we help clients consider whether an ILIT fits their overall estate plan, coordinate trust funding, and draft durable trust provisions that reflect individual goals and family circumstances. This introduction explains how an ILIT functions, common reasons people establish one, and what to expect during the planning process when working with our office.
Choosing an ILIT involves careful decisions about trustee selection, beneficiary designations, premium payment methods, and the timing of transfers. In Monument Hills and across California, thoughtful planning can prevent unintended tax consequences and minimize delays when benefits are distributed. Our firm helps clients evaluate the interaction between life insurance policies and other estate documents such as wills, revocable living trusts, and powers of attorney. This second introductory paragraph outlines practical steps to get started, what documents you should gather for an initial meeting, and how our team approaches personalizing an ILIT for your family’s needs.
An ILIT can provide clear advantages: it can remove life insurance proceeds from an estate for tax purposes, provide creditor protection for beneficiaries, and allow for controlled distributions over time. For many families in Monument Hills, this trust offers peace of mind by designating a trustee to manage policy proceeds according to the grantor’s wishes and by establishing terms for how funds are used. The ILIT also supports privacy by avoiding probate for life insurance proceeds and can be paired with other planning tools to address unique family dynamics, special financial needs, and legacy objectives for the grantor and beneficiaries.
The Law Offices of Robert P. Bergman serves clients across California, including Monument Hills, with an emphasis on practical, personalized estate planning. Our approach focuses on clear communication, careful document drafting, and coordinating an ILIT with existing estate plans such as revocable living trusts and wills. We guide clients through trustee selection, funding strategies, and potential interactions with retirement accounts and other assets. Our team works to anticipate future issues and provide durable trust language so the family’s intentions are followed over time, helping to ensure that policy proceeds are used according to the grantor’s objectives.
An Irrevocable Life Insurance Trust is established when a grantor transfers an existing life insurance policy or arranges for a new policy to be owned by the trust. Once ownership is transferred, the grantor typically gives up direct control of the policy, while the trust’s trustee manages premium payments and benefit distributions. The trust language sets rules regarding who receives proceeds, how and when distributions occur, and any conditions for use. In Monument Hills planning, careful attention is paid to timing and funding so that transfers do not unintentionally trigger estate inclusion or other tax issues while preserving intended benefits for family members.
Funding an ILIT requires coordination: premium payments can be made directly by the trust, or the grantor may make gifts to the trust to cover premiums. Gift tax considerations and the federal three-year inclusion rule for certain transfers are part of the planning conversation. The trustee’s responsibilities include maintaining the policy, filing any necessary trust paperwork, and distributing proceeds according to the trust terms. For families with blended relationships, minor children, or beneficiaries with special needs, the ILIT can be tailored to provide staged distributions, spendthrift protections, and directions for how proceeds should be invested or spent.
An ILIT is a trust that owns one or more life insurance policies on the grantor’s life and is structured so that proceeds are payable to the trust upon the insured’s death. The trust’s terms govern the use and distribution of insurance proceeds, and because the trust owns the policy, proceeds are generally excluded from the insured’s taxable estate if the trust is properly formed and funded. Typical features include trustee powers, beneficiary designations, distribution provisions, and provisions addressing premium gifts. Drafting must consider state and federal rules to achieve the intended estate planning outcomes for the insured and beneficiaries.
Creating an ILIT involves several essential elements: drafting a trust instrument with clear distribution terms, transferring or issuing the life insurance policy to the trust, selecting a trustee who will manage the policy and payments, and establishing procedures for funding premiums. The process typically begins with a planning consultation to review existing policies, assets, and beneficiary needs. After drafting, the trust must be properly funded and the policy ownership changed to the trust. Ongoing administration requires periodic review to ensure premium payments are made and trust terms remain aligned with the grantor’s objectives and any changes in family or tax law.
Below are common terms you will encounter when considering an ILIT: trustee, grantor, beneficiary, premium funding, gift tax, estate inclusion rules, and spendthrift provisions. Understanding these terms helps clients make informed choices about trust structure and funding mechanisms. The glossary clarifies how each element affects trust operation, distribution timing, and tax consequences. Family situations such as second marriages, minor beneficiaries, and special financial needs require attention to how these terms are applied in trust language to ensure the desired asset protection and distribution objectives are achieved.
The grantor is the person who establishes the ILIT and typically transfers ownership of a life insurance policy to the trust. The grantor’s decisions determine the trust terms, trustee appointment, and beneficiary designations. After the transfer, the grantor usually relinquishes direct control over the policy and the trust assets. The grantor can still influence decisions indirectly through the trust document’s written directives. In planning sessions we discuss the grantor’s intentions, potential timing concerns, and methods to fund premiums while keeping future estate inclusion risks in check.
The trustee is responsible for administering the ILIT, managing policy premiums, maintaining records, and distributing proceeds according to the trust document. Trustee duties can include investing funds held by the trust, making tax filings, and coordinating with financial institutions and beneficiaries. Selection of an appropriate trustee is an important decision because the trustee acts as a fiduciary and must balance the grantor’s directives with beneficiaries’ needs. Many clients choose an individual, a family member, or a professional fiduciary depending on familiarity with financial matters and comfort with ongoing administration responsibilities.
A beneficiary is an individual or entity designated to receive benefits from the ILIT after the insured’s death. Trust terms can specify how proceeds are distributed, whether in lump sums or staged payments, and for which purposes funds may be used. Beneficiaries may include spouses, children, grandchildren, charities, or trusts for special needs. Proper beneficiary designation within the trust avoids probate and ensures proceeds are managed according to the grantor’s wishes. In complex family situations, careful language helps reduce the potential for disputes and preserves intended protections for vulnerable recipients.
Gift tax and estate inclusion rules affect how transfers to the ILIT and premium payments are treated for tax purposes. Funding mechanisms, such as annual exclusion gifts to the trust for paying premiums, require attention to gift tax limits and documentation. Additionally, transfers within three years of death can trigger estate inclusion under federal rules, which may affect the planned tax benefits of an ILIT. Understanding these rules helps clients plan timing and funding strategies that align with federal and state tax considerations and avoid unintended consequences for the estate plan.
When deciding whether an ILIT is appropriate, it is helpful to compare it with alternatives such as keeping a policy in your name, using a revocable living trust, or designating individual beneficiaries directly. Each option affects tax treatment, creditor protection, and control over distributions. An ILIT can remove proceeds from the estate and provide structured distributions, whereas a revocable trust offers flexibility but does not achieve the same estate tax exclusion for life insurance proceeds. We help clients weigh the trade-offs, consider family dynamics, and determine which combination of tools best achieves the client’s financial and legacy objectives.
For individuals whose life insurance holdings are modest and whose overall estate falls well below thresholds for estate taxation, a limited approach may be sufficient. In such situations, keeping the policy in the owner’s name and naming beneficiaries directly can be simpler and less administratively burdensome. This approach may reduce legal and trustee fees and minimize paperwork. However, it also offers less protection from creditors and may provide fewer options for staged distributions or management of proceeds. We assist clients in Monument Hills in evaluating whether a straightforward arrangement meets their needs or whether more structured planning is warranted.
A limited planning approach can also be fitting for families with simple dynamics, where beneficiaries are financially capable adults and there is a clear agreement about distribution of proceeds. When there are no concerns about creditor claims, spendthrift issues, or complex inheritance scenarios, direct beneficiary designations and minimal trust arrangements might be adequate. This saves time and costs associated with forming and administering a trust. We review family circumstances carefully to confirm that a limited plan will not create unintended gaps or disputes in the future and provide recommendations tailored to each client’s goals.
When life insurance proceeds are substantial or an estate could approach applicable federal and state tax thresholds, a comprehensive ILIT-based strategy can protect assets from inclusion in the taxable estate and provide structured distributions to beneficiaries. This planning reduces the risk that large insurance payouts will be taxed or cause disputes among heirs. A comprehensive service includes careful drafting of trust terms, coordination with retirement plans, and long-term administration planning to ensure that the client’s legacy goals are achieved while preserving family harmony and financial security for beneficiaries.
Comprehensive planning is often needed when beneficiaries include minors, individuals with limited financial capacity, or those receiving government benefits where benefit protection is important. An ILIT can be tailored to provide staged distributions, trustee oversight, and protections that guard proceeds from creditors while supporting long-term needs. For blended families or situations with potential disputes, detailed trust provisions reduce ambiguity and protect the grantor’s intentions. Our firm helps design durable provisions that address specific family dynamics and ensure that proceeds are used for intended purposes such as education, housing, or long-term care expenses.
A carefully drafted ILIT creates a predictable framework for how life insurance benefits are distributed, helping to avoid probate and reducing the likelihood of family disputes. By clarifying trustee powers, beneficiary rights, and distribution triggers, the trust preserves the grantor’s intentions and provides a measure of protection against creditors’ claims. The comprehensive approach allows for tailored provisions such as incentives for education, protections for beneficiaries who are minors, and mechanisms for charitable gifts. This planning can contribute to long-term financial security for beneficiaries while aligning with the grantor’s broader estate plan.
Beyond tax and creditor considerations, a comprehensive ILIT plan offers administrative clarity and continuity. Selecting a trustee and detailing their duties in advance reduces confusion at the time of a claim, ensuring a smoother claims process and timely distribution. The trust can also include provisions for successor trustees, requirements for reporting, and guidelines for investments. When combined with a revocable living trust, will, powers of attorney, and healthcare directives, the ILIT integrates into a cohesive estate plan that responds to the client’s lifetime concerns and supports an orderly transfer of resources to the next generation.
One key advantage of an ILIT is the potential to exclude insurance proceeds from the taxable estate, which can reduce estate administration burdens and possibly lower estate tax exposure. Because proceeds pass through the trust rather than the probate estate, beneficiaries may receive funds without the delay and publicity of probate proceedings. The trust structure also allows for distribution terms that limit direct access by beneficiaries, protecting assets from waste and creditor claims. Effective coordination with other estate documents is essential to realize these benefits and to avoid unintended tax or inclusion consequences.
A comprehensive ILIT allows the grantor to control how and when beneficiaries receive proceeds, which can be particularly helpful for minor children or beneficiaries who may need oversight. Provisions can establish staged distributions, conditions for use, and protections that limit creditors’ claims against trust assets. Trustees can be directed to manage investments, provide periodic accounting, and coordinate with other trust provisions to support educational needs, healthcare expenses, or long-term financial planning. This level of control helps ensure that the grantor’s intentions are followed and that beneficiaries benefit in a manner consistent with family goals.
Begin the ILIT process by assembling relevant documents, including life insurance policies, beneficiary designations, current will or revocable trust documents, retirement account statements, and a summary of other significant assets. Having these materials ready for an initial meeting helps identify whether existing policies should be transferred to a trust or whether a new policy should be issued in the trust’s name. Early preparation also helps clarify possible gift tax implications and identify which family relationships or beneficiary needs may require special trust provisions or tailored distribution instructions.
Establish clear methods for funding premium payments, whether by transferring funds to the trust or arranging for annual gifts to cover premiums. Documenting the funding plan is essential to avoid confusion and to support compliance with gift tax rules and any annual exclusion strategies. Keep records of gifts and premium payments and coordinate with financial advisors and insurers to ensure the trust can maintain the policy as intended. Regular review of the trust funding plan helps accommodate changes in personal finances, policy performance, or family circumstances to preserve the intended benefits of the ILIT.
Families consider an ILIT for a variety of reasons including potential estate tax mitigation, protection of insurance proceeds from creditors, and the ability to control distributions over time. For individuals who expect significant life insurance payouts or who want to coordinate retirement and legacy planning, an ILIT provides structure that can prevent proceeds from becoming part of the probate estate. Additionally, an ILIT may help preserve benefits for beneficiaries who are minors or who require oversight. We discuss each client’s objectives to determine whether an ILIT aligns with their long-term family and financial goals.
Other reasons to consider an ILIT include preserving privacy for beneficiaries, ensuring quick access to funds for immediate needs after a death, and providing a vehicle for charitable giving or legacy gifts. Families with complex asset portfolios or blended households often benefit from the clarity and control an ILIT provides. While an ILIT requires thoughtful administration and possible trustee fees, the protections and distribution mechanisms it offers can make it a valuable component of a larger estate plan. We evaluate the trade-offs and help clients choose a plan that matches their circumstances and values.
Common circumstances that prompt ILIT planning include when insured individuals have substantial life insurance policies, foresee estate tax exposure, have beneficiaries who are minors, or wish to protect proceeds from potential creditors. It is also used by those who want to provide structured inheritances, support special needs family members without jeopardizing benefits, or leave charitable gifts. In each of these situations, an ILIT can be tailored to address timing of distributions, preservation of funds, and conditions on use, helping ensure that proceeds are preserved for intended purposes and managed responsibly after the insured’s death.
When life insurance policy values are large relative to an overall estate, placing the policy in an ILIT can help minimize estate inclusion and provide clarity about how proceeds should be handled. This is particularly relevant for business owners, high net worth households, or individuals who wish to leave a significant legacy. The ILIT can be drafted to address tax planning and to establish mechanisms for distribution that reflect the grantor’s priorities. We counsel clients through the timing and funding considerations required to realize intended benefits while remaining mindful of federal rules and documentation.
An ILIT is often used when beneficiaries include minor children or vulnerable adults who need protection from mismanagement or external claims. Trust terms can provide staged distributions, require trustee oversight for major expenditures, and protect funds from creditors or poor financial decisions. These protections help ensure that proceeds are used for education, housing, health care, or long-term support as the grantor intended. Creating clear instructions for trustee duties and beneficiary circumstances reduces the chance of disputes and helps maintain continuity for beneficiaries during difficult times.
Blended families often require careful planning to ensure that proceeds are distributed according to the grantor’s wishes while balancing the interests of a current spouse and children from another relationship. An ILIT provides the flexibility to set terms that address these competing concerns by specifying distribution priorities, conditions, and protections. This reduces ambiguity and increases the likelihood that assets will be handled fairly. Our approach includes comprehensive discussions about family dynamics and legal strategies that align the ILIT with other estate planning documents to avoid conflicts and unintended outcomes.
We provide Monument Hills residents with focused estate planning support tailored to local needs and California law. From preparing an ILIT to coordinating revocable trusts, wills, and powers of attorney, our office assists with drafting documents and advising on funding and administration. We emphasize practical solutions that reflect each client’s family circumstances and financial objectives. If you are considering an ILIT or reviewing existing policy ownership and beneficiary designations, we offer a thoughtful planning process to help determine the best approach for preserving wealth and protecting beneficiaries in your community.
Our firm helps clients in Monument Hills and throughout California with careful planning and clear communication. We collaborate closely with clients to understand family dynamics, financial goals, and timing considerations so the trust documents reflect practical needs and preferences. From drafting precise trust language to coordinating transfers and funding arrangements, our approach focuses on anticipating possible issues and providing solutions that promote a smooth administration process. Clients appreciate our attention to detail, responsiveness, and commitment to aligning legal planning with long-term objectives for their families and beneficiaries.
We take a personalized approach to ILIT planning, offering guidance about trustee duties, beneficiary provisions, and the intersection of trusts with retirement accounts and wills. Our role includes helping clients identify the most effective structure for their goals and explaining potential tax and administrative consequences so clients can make informed decisions. We provide clear timelines for implementation, coordinate with insurance carriers as needed, and prepare documentation that supports long-term trust maintenance. This practical orientation helps clients feel confident that their planning will be carried out according to their intentions.
Clients also benefit from our commitment to ongoing support after documents are in place. Estate plans evolve, and we encourage periodic reviews to ensure that an ILIT remains aligned with changing family circumstances, tax law updates, and shifts in financial holdings. Whether changes are needed for trustee succession, funding strategies, or to reflect new beneficiaries, we help implement amendments or restatements in a way that preserves the original planning objectives. Our aim is to be a reliable resource for Monument Hills families as their long-term planning needs evolve.
Our process begins with an initial consultation to review your life insurance policies, estate documents, and family priorities. We then recommend a trust structure and draft an ILIT tailored to your goals, coordinate policy transfers or new policy issuance, and document funding plans for premium payments. Following execution, we provide guidance for trust administration and coordinate with trustees and financial institutions to ensure smooth operation. Periodic reviews help confirm that the ILIT continues to meet evolving needs, and we assist with any modifications or successor trustee appointments as circumstances require.
In the first stage, we gather information about current life insurance policies, estate planning documents, and family circumstances. This review identifies whether existing policies should be transferred to a trust or whether a new policy issued in the trust’s name is more appropriate. We discuss the client’s long-term objectives, potential tax considerations, and funding strategies for premiums. This assessment clarifies the desired distribution outcomes and informs trust drafting so that the ILIT aligns with the client’s overall estate plan and family priorities.
We request copies of life insurance policies, beneficiary designations, wills, revocable trust documents, and financial statements. Reviewing these documents helps identify legal or administrative changes needed to implement the ILIT properly, including any beneficiary updates or policy ownership transfers. This stage also includes a discussion about premium payment methods and whether annual gift strategies or trust-funded payments are appropriate. A thorough review prevents oversights that can affect tax treatment or the effectiveness of the ILIT.
During the planning meeting we discuss trustee options, distribution provisions, funding plans, and timing to avoid adverse tax consequences. We evaluate whether the ILIT should include staged distributions, spendthrift protections, or specific directives for charitable gifts. After selecting the appropriate strategy, we prepare the draft trust document and explain the steps needed to transfer or issue the policy in the trust’s name. Clear communication at this stage ensures the client understands the implications and next steps.
Once the strategy is chosen, we draft the ILIT document with provisions tailored to the client’s goals, prepare trustee acceptance forms, and provide instructions for transferring policy ownership. Execution of the trust and any required endorsement or assignment forms is followed by implementing the agreed funding plan, whether through direct trust payments or documented gifts to the trust. We coordinate with insurers and financial institutions to confirm ownership changes and policy status, ensuring the trust is properly funded and positioned to achieve its intended benefits.
Preparing the trust involves drafting clear provisions for distributions, trustee powers, successor trustees, and recordkeeping requirements. We review the draft with the client to ensure each clause reflects personal objectives and addresses potential contingencies. Attention to detail in the trust language helps minimize ambiguities and reduces the likelihood of disputes later. After revisions and client approval, we arrange formal execution and notarization, then provide copies and guidance about ongoing administrative responsibilities.
This step includes coordinating with the insurance carrier to transfer policy ownership to the ILIT, updating beneficiary designations to the trust, and documenting any gifts intended to pay premiums. We ensure that all paperwork required by the insurer is completed correctly and that the timing of transfers complies with relevant rules to avoid unintended estate inclusion. Written documentation of funding arrangements supports gift tax strategies and provides a clear record for trustee administration and future reviews.
After the ILIT is established and funded, ongoing administration includes premium payments, recordkeeping, tax filings if applicable, and preparing for payout procedures when a claim arises. We advise trustees on their duties and can provide support in managing trust assets and distributions. Periodic reviews are recommended to ensure the ILIT remains consistent with the client’s estate plan, especially if there are changes in family circumstances, policy performance, or relevant law. Proactive reviews help preserve the intended benefits of the trust over time.
We assist trustees by providing guidance on recordkeeping, premium payment procedures, and communications with beneficiaries. Proper documentation of gifts used to pay premiums and of trust activities helps maintain clarity for tax and administrative purposes. Trustees should maintain detailed records of all transactions, correspondence with insurers, and any distributions made from the trust. Our office can offer templates, checklists, and consultations to support trustees in fulfilling their fiduciary duties responsibly and transparently.
Regular review of the ILIT ensures it continues to reflect the grantor’s wishes and adapts to changes in family dynamics, policy performance, or the law. If adjustments are required, we discuss options such as amendments, restatements where permitted, or coordinating changes within other estate planning documents. Staying proactive reduces the risk of disputes and helps maintain the effectiveness of the trust. We recommend periodic check-ins to confirm that premium funding, trustee arrangements, and beneficiary designations remain appropriate over time.
An Irrevocable Life Insurance Trust is a trust that owns life insurance policies and receives policy proceeds upon the insured’s death. The trust document specifies who receives the proceeds and how they are to be used, offering structured distributions and protections that can prevent proceeds from entering probate. Because the trust owns the policy, properly formed ILITs can keep proceeds out of the grantor’s estate for federal estate tax purposes, provided timing and funding rules are observed. The trustee manages the policy and follows the trust’s distribution rules. The ILIT requires careful coordination when transferring an existing policy or issuing a new policy in the trust’s name. After ownership is transferred, the grantor typically cannot change trust terms unilaterally. Funding strategies, premium payment arrangements, and the timing of transfers are important to avoid estate inclusion issues. We recommend a planning meeting to review policies and determine the most appropriate steps for establishing an ILIT that matches your objectives.
Once a life insurance policy is transferred into an ILIT, the policy is owned by the trust and the trustee becomes responsible for managing it. The grantor generally gives up direct ownership and control of the policy, although the trust terms may allow the grantor to direct certain actions within limits. Because ownership changes, the grantor’s ability to access cash values or make changes without trustee involvement is limited after the transfer. If a grantor needs ongoing access to policy benefits or wishes to retain control, alternatives to an ILIT may be considered, such as keeping the policy in personal ownership or exploring trust arrangements that balance control with protection. We can review your goals and recommend an approach that preserves intended benefits while considering the trade-offs inherent in transfer of ownership.
Premiums for a policy owned by an ILIT can be paid directly from trust assets or through gifts from the grantor to the trust that the trustee then uses to pay premiums. Many clients use annual exclusion gifts to the trust and provide documentation to support those gifts. The trustee must carefully document receipt and use of such gifts to maintain clarity for tax records and trust administration. If premium funding strategies are not properly documented, it can create complications. For that reason, the trust instrument typically includes provisions outlining funding methods and the trustee’s authority to manage premium payments. We help clients design practical funding arrangements that meet tax and administrative requirements while preserving the intended policy coverage.
An ILIT can help reduce federal estate tax exposure by removing life insurance proceeds from the grantor’s taxable estate if the trust is properly structured and funded outside of the three-year inclusion period. While California does not impose a separate state estate tax currently, federal estate tax planning remains relevant for larger estates. The ILIT’s ability to separate insurance proceeds from probate and estate valuation can be a key component of a larger estate tax mitigation strategy. Careful attention to the timing of transfers, funding methods, and compliance with federal rules is essential to preserve tax benefits. We work with clients to evaluate whether an ILIT is appropriate given their estate size and planning objectives and to coordinate trust provisions with other estate planning documents to achieve cohesive tax and distribution outcomes.
Choosing a trustee involves balancing trustworthiness, financial acumen, and availability to handle administrative duties. Trustees are responsible for maintaining the policy, paying premiums, keeping records, and distributing proceeds in accordance with the trust terms. Some clients select a family member, while others choose a trusted friend or a professional fiduciary depending on the complexity of administration and the family’s needs. It is important to name successor trustees in the document to provide continuity if the primary trustee cannot serve. Trustees should understand fiduciary duties and be willing to keep detailed records. We assist clients in discussing trustee responsibilities and in documenting contingency plans to ensure the trust operates smoothly when the time comes.
The three-year rule refers to a federal provision that can cause gifts or transfers made within three years of the grantor’s death to be included in the taxable estate. This rule is particularly relevant when an existing policy is transferred into an ILIT close to the grantor’s death, potentially negating the intended estate tax benefits. Timing is therefore a critical consideration when transferring policy ownership to the trust. To reduce the risk of estate inclusion under this rule, clients may choose to establish the ILIT and allow it to purchase a new policy or transfer an existing policy well before the three-year window. We discuss timing strategies and document funding plans to align with federal rules while minimizing unintended tax consequences for the estate.
If an ILIT is not properly funded to cover premiums, the policy could lapse, which would defeat the purpose of the trust and leave beneficiaries without intended protection. Trustees should monitor premium due dates, maintain records of funding, and follow the trust’s instructions for handling premium payments. If funding gaps occur, options may include making corrective gifts or, in some cases, evaluating alternatives to maintain coverage. Preventing lapses is a key part of trustee duties, and clear funding plans help avoid this issue. We assist in designing practical premium funding mechanisms and advising trustees on documentation to ensure ongoing policy maintenance and to protect the grantor’s intended legacy for beneficiaries.
Generally, terms of an ILIT are intended to be irrevocable, so changing beneficiaries or altering trust provisions after creation is limited. However, in some circumstances it may be possible to modify or terminate a trust if all beneficiaries consent or under certain state court procedures. The ability to change the trust depends on the trust language and applicable law, and such changes should be undertaken with careful legal guidance to avoid unintended tax or administrative consequences. For clients who anticipate the need for flexibility, alternative arrangements or trust provisions can be considered at the time of drafting to allow limited adjustments or to name successor beneficiaries. We review the client’s needs and explain the options available so that the trust’s structure aligns with long-term goals while recognizing the generally irrevocable nature of ILITs.
An ILIT typically functions alongside other estate planning documents such as a revocable living trust and a will. While the ILIT handles life insurance proceeds, the revocable trust and will address distribution of other assets and the appointment of guardians for minor children. Coordinating beneficiary designations and trust terms prevents conflicts and ensures asset distribution proceeds according to the overall estate plan. During planning, we review all existing documents to confirm that beneficiary designations are consistent with the trust’s provisions and that the ILIT integrates smoothly with the client’s overall estate plan. This coordination helps avoid unintended overlaps or gaps and ensures that each component of the plan supports the grantor’s objectives.
Trustees should maintain comprehensive records including copies of the trust document, proof of premium payments, correspondence with insurers, receipts for gifts used to fund premiums, and any trust accounting or distributions made. These records support transparency and provide documentation for tax and administrative purposes. Keeping detailed records also helps successors understand past decisions and maintain continuity in administration. Records should be retained for a reasonable period depending on the nature of the documents and applicable legal requirements. Important items such as the trust instrument and proof of ownership transfers should be kept indefinitely, while financial records should be retained for several years in case of tax or accounting review. We advise trustees on best practices for document retention and recordkeeping.
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