Irrevocable Life Insurance Trusts (ILIT)

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An Irrevocable Life Insurance Trust (ILIT) is a legal arrangement designed to own and manage life insurance policies and the proceeds from them. Once established, the trust is permanent and cannot be altered or revoked. ILITs are commonly used to reduce estate taxes, protect assets, and ensure that life insurance benefits are distributed according to the policyholder's wishes.

How Does an ILIT Work?

The policyholder (known as the grantor) creates the trust and transfers ownership of a life insurance policy into it. Once the policy is owned by the ILIT, the trust becomes the beneficiary of the policy proceeds. At the time of the insured's death, the trust receives the death benefit and distributes it according to the terms set by the grantor.

Since the ILIT owns the policy, the death benefit is excluded from the insured's taxable estate, which can significantly reduce estate taxes.

Why Create an ILIT?

Estate Tax Reduction

By transferring ownership of the policy to the trust, the death benefit is not included in the taxable estate, potentially saving millions in estate taxes.

Asset Protection

ILITs protect the death benefit from creditors and lawsuits, ensuring that beneficiaries receive the full amount.

Controlled Distribution

The trust allows you to specify how and when the funds are distributed to beneficiaries, offering control and protection for future generations.

Comprehensive Estate Planning Expertise

We collaborate with your legal and financial advisors to structure an ILIT that aligns with your overall estate planning goals — with custom solutions and transparent, experienced guidance.

Examples of Actual Deals

Case 1: Male 74, Female 69

Estate Value
$25,000,000
Policy Size
$5,000,000
Estate Tax Savings
$2,000,000
Normal lifetime funding
$110,500 annually

By transferring the ownership of a $5,000,000 life insurance policy into an ILIT, the family avoided $2,000,000 in estate taxes and ensured the full death benefit was distributed according to the grantor's wishes.

Skip Pay Alternative: $305,000 years 1-3, with no future premium required at ages 93 and 88, at which point we work with the carrier to find the minimum required premium to keep the policy in force for an additional year — repeating each year to minimize overall out-of-pocket costs.

Case 2: Male 49, Female 48

Concern
Protecting minor beneficiaries
Policy Size
$3,000,000

An ILIT was structured to distribute funds incrementally to minor beneficiaries, ensuring financial security for their upbringing while safeguarding the remaining funds until they reached adulthood.

Normal lifetime funding: $19,230 annually, guaranteed to ages 102/101. A 15 Pay Alternative runs $33,240 annually for 15 years (total $498,600) and a 10 Pay Alternative runs $44,844 annually for 10 years (total $448,440), each guaranteed to ages 102/101 for $3,000,000 of tax-free death benefit.

We're here to help simplify and guide you through your journey.

Reach out today and let's build a plan around your goals.