What is an irrevocable life insurance trust (ILIT)?

An irrevocable life insurance trust (ILIT) is a trust created in California which owns and controls a life insurance policy. It is designed to provide an estate plan that can help individuals manage their tax liabilities and limit their estate’s exposure to the estate tax. A key component of an ILIT is that once it is created it cannot be changed or revoked, making it an irrevocable trust. When an ILIT is created and funded, the insured’s life insurance policy is owned by the trust, and not the insured or the estate. As a result, the death benefit will not be included in the gross estate of the insured and thus not subject to estate taxes. In addition, the trust can be designed such that the death benefit is dispersed to the beneficiaries as desired, such as lump-sum payments, annual payments, or even investments. The trust can also provide protection should the insured become disabled, thereby ensuring that the life insurance benefit will still be paid out. Ultimately, an ILIT is a powerful tool that can be used to manage an estate’s tax liability while providing the beneficiaries with sufficient funds to support them. It can also provide peace of mind knowing that the estate’s assets are safe and secure and the desired beneficiaries will receive the benefits as intended.

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What is an irrevocable life insurance trust (ILIT)?

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