What is an irrevocable life insurance trust (ILIT)?

An irrevocable life insurance trust (ILIT) is an estate planning tool available in Pennsylvania. It is used to protect a life insurance policy from estate taxes. In an ILIT, the policy owner transfers ownership of the policy to the trust. The trust then owns the policy and pays for the premiums. As a result, upon the death of the insured, the proceeds of the policy will not be subject to estate taxes. The benefit of an ILIT is twofold. First, it allows the policy owner to protect the policy from estate taxes. Second, if the ILIT is set up correctly with properly drafted trust documents, it can allow the policy owner to control who receives the proceeds of the policy, even after their death. This can be especially beneficial if the insured wished to leave the policy proceeds to individuals other than those named as beneficiaries in the policy. A properly drafted and funded ILIT is an essential piece of estate planning in Pennsylvania. An experienced estate planning attorney can help you determine if establishing an ILIT is right for your circumstances and help you set up the trust correctly.

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What is an irrevocable life insurance trust (ILIT)?

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