The Benefits of an Irrevocable Life Insurance Trust
When you start putting together an effective plan for the orderly and cost-effective distribution of your property upon death, one of the tools to consider is an irrevocable life insurance trust (known as an ILIT).
Here are some of the principal benefits to using an ILIT to address some part of the passing on of your estate:
- An ILIT allows heirs access to life insurance proceeds without subjecting the proceeds to estate taxation or probate expenses — When you place property, including a life insurance policy, in a trust, you no longer retain ownership of that property, and it will not be considered part of your estate, thereby avoiding probate. However, if you exercise what the law calls “incidents of ownership” of the property (taking out a loan on the insurance policy, for example), the policy may be included in your estate.
- The death benefit payoff into an irrevocable life insurance trust can be used to pay estate taxes, as well as other debts or expenses of the estate.
- There are specific generation skipping tax exemption benefits to using an irrevocable life insurance trust
- Assets in an irrevocable life insurance trust typically cannot be available to creditors of a beneficiary.
- An irrevocable life insurance trust, when properly drafted, can minimize or avoid gift tax consequences.
- Because property held in trust does not go through probate, the terms and conditions of the trust will remain confidential, unlike a will, which becomes a matter of public record as a result of the probate process.
At Halligan & Keaton, in Media, Pennsylvania, we have more than 60 years of combined legal experience. We provide a free initial consultation to every client. To discuss your estate planning needs with an experienced lawyer, call our office at 610-566-6030 or contact us online. We will travel to your home, a long-term care facility or the hospital to meet with you.