Pages Navigation Menu

Things to do in Orange County for OC Moms

Categories Navigation Menu

Setting Up An Irrevocable Life Insurance Trust

Irrevocable Life Insurance Trust is regarded as an irrevocable and non-amendable trust established in the context of the purpose of being the owner and beneficiary of one or more life insurance policies. When they are truly drafted, the ILIT is known for doing the proceeds of the proceeding of the life insurance policy held in the trust to make sure that estate taxes would be avoided. Here, we are going to mention a lot about it in a detailed manner –

General Structure

An ILIT is truly established by the formation of the trust followed by the contributor assigning existing insurance to the trust or the trustee of the trust purchasing a policy directly from an insurance company. The insured retains no advantages in the trust. If the trust comes only with a life insurance policy or policies, while having the insured’s lifetime, premiums are typically paid by the insured to make annual gifts to let the trustee of the trust in an amount sufficient in the context of the trustee to pay the premiums of the life insurance policy.

Establishing The Trust

Establishing an effective life insurance trust always starts with an entirely drafted trust instrument. Immediately thereafter, the life insurance policy is needed to be transferred to the trust and consideration should truly be imparted to the ongoing Irrevocable Life Insurance Trust administration issues including income tax reporting and payment of premiums. Though these tasks probably appear basic and rudimentary, they are tricky to the success of the trust as well as for the estate, gift and generation-skipping transfer tax advantages to be realized.

Buying or Assignment Of A Life Insurance Policy

The prominent purpose of creating an insurance trust is truly for the trust to carry life insurance. The Irrevocable Life Insurance Trust can acquire ownership of the life insurance policy by either buying a policy or by the grantor transferring an existing policy to the trust by gift. Once the trust becomes the owner of a life insurance policy, it is needed to immediately name itself in the form of the beneficiary of the insurance policy.

If the trust is the applicant, owner and beneficiary of the life insurance policy right from the outset, none of the death advantages will truly be included in the grantor’s gross taxable estate since the grantor does not have any “incident of ownership” over the policy. To put it in simple words, the existing policy is truly transferred to the trust by the grantor. The grantor is needed to survive for 3 years once the insurance is truly transferred to get estate tax exclusion.

Funded V Unfunded Trust

Have you been wondering about the funded v unfunded trust? An ILIT probably be funded or unfunded. A funded trust is all about containing assets in comparison to life insurance policies. The assets are truly investment accounts held to produce sufficient income to offer the insurance premiums. Funding the trust comes up with the additional advantages of allowing future appreciation of the assets should be sheltered from estate taxation.

Conclusion

So, what are you waiting for? It is time to go ahead and say yes to Irrevocable Life Insurance Trust and have the best services.

 

 

Sign Up for Our Newsletter
Connect With Us


Leave a Comment

Your email address will not be published. Required fields are marked *