An irrevocable trust is one that can’t be revoked (canceled) or amended by the creator of the trust. An irrevocable life insurance trust, or ILIT, is set up to hold a life insurance policy including the funds to pay for the policy’s premiums. Like most life insurance policies, the death benefits are typically not taxable, but the ILIT also protects against estate taxes on interest accrued by the life insurance policy and potential nursing homes. A whole life policy may have earned thousands of dollars in interest over time. The ILIT can ensure this interest, along with the death benefit amount, all go to the policy’s named beneficiary(s).
Despite these complications, the potential to save hundreds of thousands or even millions of dollars in estate tax liability makes irrevocable life insurance trusts well worth the effort. By working closely with an estate planning attorney, trust company, and other professionals, you can ensure that your ILIT meets both your needs and the needs of your family.
The downfall of ILIT’s is the administration. At Legacy Trustee Services we have been appointed Trustees for many ILITS. An ILIT is a type of trust that may require yearly administration. If those administration steps are not followed, all benefits may be lost. Legacy ensures that all annual Crummy Letters are sent, accounting is provided, insurance premiums are paid, and much more. By having Legacy Trustee Services be your Trustee of your ILIT you can ensure your ILIT will be administered correctly.