Irrevocable Life Insurance Trust (ILIT)
Life insurance death benefits are considered part of a decedent’s estate and are therefore subject to estate tax. The proper design, funding, and implementation of a special trust designed to own life insurance, known as an Irrevocable Life Insurance Trust or ILIT, can save estate taxes. Unfortunately, many people consider these trusts for estate tax reasons only, but the robust asset protection and asset management consolidation for beneficiaries can be reason enough to create one of these trusts.
Stan Miller, a principal of WealthCounsel and estate planning attorney, summarizes the asset management benefits of trusts:
“In my experience, wealth that is aggregated and managed will grow and provide a lasting benefit to a family. On the other hand, wealth that is divided and distributed dissipates. It simply doesn’t create a long-term benefit. Life insurance, for many people, creates instant wealth that, when properly managed inside a trust, can provide lifelong benefits to your spouse, children, and even grandchildren.”