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By owning the policy, a trust (specifically an ILIT) ensures the death benefit is usually excluded from your taxable estate, preserving more wealth for heirs.
The death benefit is paid directly to the trust, bypassing the public and often lengthy probate process, ensuring faster financial relief for your family.
Gain full control over distributions. You can dictate exactly when, how, and for what purpose beneficiaries receive funds, preventing early squandering.
Removes the death benefit from your taxable estate.
Ensures immediate, private distribution without court probate.
Protects young or special needs beneficiaries from misuse.
Name a trusted trustee to manage and distribute the funds.
Protects the policy proceeds from the beneficiary's creditors.
Control when and how money is paid to your loved ones.
Trust details remain private, unlike public probate records.
A strategic tool for high-net-worth estate preservation.
Trusts are primarily beneficial for high-net-worth individuals who want to minimize estate tax liability, and for those who need to control the timing and manner of the payout to beneficiaries.
A Revocable Trust can be changed or canceled, but an Irrevocable Trust (like an ILIT) generally cannot. The Irrevocable nature is what typically provides the greatest estate tax benefits.
Generally, no. To achieve the tax benefits, you must surrender control. The trustee must be a third party (like an adult child, friend, or corporate trustee) who manages the trust.
Life insurance is already free from income tax. The trust helps eliminate or reduce estate tax liability, which applies to large estates above the federal exclusion limit.
Irrevocable trusts are designed to be permanent and cannot be easily changed. This is a major consideration that requires consultation with a qualified estate planning attorney.
You can use a new policy or transfer an existing one. However, transferring an existing policy may carry a three-year lookback rule for tax purposes, so timing is crucial.