Estate Planning

With a properly drafted ILIT, death proceeds pass into the trust, where funds can be distributed income tax-free to the trust beneficiaries as directed in the trust document. By avoiding the grantor/insured’s estate, insurance proceeds in an irrevocable trust do not increase the decedent’s estate tax burden and also avoid probate. Thus, if the ILIT is properly drafted, the proceeds are able to provide a source of funds to pay estate taxes for the estate, rather than from the estate.

While ILITs are more typically used for the purposes discussed above, they may be a suitable solution for the estate plan of those whose net worth is not at the level to generate estate tax concerns.  The use of trusts involves complex tax rules and regulations. Consider enlisting the counsel of an estate planning professional and your legal and tax advisors prior to implementing such sophisticated strategies. The cost and availability of life insurance will depend on factors such as age, health, and the type and amount of insurance purchased.