Irrevocable Life Insurance Trust Attorney in Plano, TX

The Law Offices of John F. Williams, Jr. Advise on the Benefits an Irrevocable Life Insurance Trust Offers

An Irrevocable Life Insurance Trust, or ILIT, is an Estate Planning tool that more and more families are using today along with a Living Trust. Whether it is for a special needs child, to fund future estate tax issues, or to ensure that certain beneficiaries will receive an income for life; an ILIT is the solution. Many of my estate planning clients believe that all life insurance proceeds are tax free. On the contrary, the beneficiary receives the settlement check free of tax, but the proceeds are still counted in the deceased insured’s taxable estate.

Creating an ILIT

Creating the ILIT is the easy part. The hard part is making sure the client(s) can qualify for the life insurance which is tied to the trust document. Assuming that you and/or your spouse qualify for the life insurance, then my job is to create a trust document that will perform when it is most needed.

The ILIT is established so that it becomes the owner and premium payor of the life insurance policy or a survivorship life insurance policy, sometimes called second to die life insurance or joint & survivor life insurance.

The insureds deposit monies into a separate trust account and the appointed manager of the trust known as the trustee directs the money to be paid on behalf of the ILIT to the insurance company for the premium due. When the insured (or insureds on a survivorship life insurance policy) dies, the life insurance proceeds are deposited into a trust account established by the manager of the ILIT. The funds are used for the beneficiaries as directed by the terms of the trust. If the trust instructs the trustee to pay Estate Taxes with the proceeds, then he or she will do so once the estate taxes are determined.

The purpose of this whole procedure is to shield life insurance proceeds from the estate where they would be taxed. This type of trust is commonly used in addition to a tax efficient estate plan. It consists of a pour-over will and living trust with family and marital deduction trusts when the estate looks to exceed the tax exemption for the individual. It ensures removal of life insurance from the estate and will alleviate or reduce this problem.

If you have other questions regarding ILITs, Living Trusts, Wills, or Estate Planning, please contact the Law Offices of John F. Williams, Jr. today. Call today for your FREE CONSULTATION and I look forward to serving your needs.