What is an irrevocable life insurance trust (ILIT)?

An irrevocable life insurance trust (ILIT) is an estate planning tool available in Virginia that allows the insured to transfer ownership of life insurance policies to a trust. This trust makes the insurance policy assets irrevocable, meaning the trust assets can no longer be changed or revoked. The assets held in the trust are not subject to the claims of any creditor, and the assets are not included in the taxable estate of the policyholder. In Virginia, an ILIT can be established to protect insurance proceeds from estate taxes and to insure that the proceeds of the policy go to the trust’s beneficiaries. In Virginia, an ILIT can be established in several ways. The most common way is by the insured designating a trust as the policy’s beneficiary. The trustee of the ILIT then becomes the owner and beneficiary of the policy. The trustee must follow certain rules in regards to the trust such as making timely payments to the trust and distributing the funds accordingly. With an ILIT, life insurance proceeds can be used to pay estate taxes, funeral expenses, medical bills, or other debts, which can help the insured’s beneficiaries in many ways. An ILIT can also be used to provide income to beneficiaries, to fund educational expenses, or to purchase property. In addition, the trust can provide tax-free gifts for the policyholder’s beneficiaries. Overall, an ILIT is an effective estate planning tool in Virginia that provides financial security for the policyholder’s family and heirs. The assets in the trust will not be subject to probate fees or to the claims of creditors, and the insured can be sure that their policy proceeds will go to their beneficiaries.

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What is an irrevocable life insurance trust (ILIT)?

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