What is a life insurance trust?

A life insurance trust, also known as an ILIT or an Irrevocable Life Insurance Trust, is an estate planning tool used in California. This type of trust is used to control the ownership of and distributions from a life insurance policy. The trust becomes the owner of the life insurance policy, not the individual. It also specifies who will receive the death benefit from the policy. The life insurance trust is important because the policy and the death benefit are not subject to federal or California estate taxes upon the insured’s death. This means that the policy funds are not subject to taxation, and can be used to fund needs such as long-term care, medical bills, estate debts, and other expenses that may face the deceased’s family. The trust must be drafted properly and managed carefully in order for it to be effective. This means that only the trust can be the owner of the policy and that the trust must manage the policy, build cash value, and make distributions from the policy according to the law. In addition, the trust must have an independent trustee who is responsible for the management and distribution of the policy. The life insurance trust is an important tool in estate planning, and it allows families to provide for their loved ones while avoiding estate taxes. It is especially important for those with sizable estates and for individuals with large life insurance policies. Consulting an experienced attorney for this type of trust is recommended.

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What is a life insurance trust?

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