You may be considering putting together a trust but are unsure of which trust is right for you. With so many options, it can get overwhelming in a hurry if you are trying to choose a trust with no advice from an experienced trusts attorney. Fortunately, with the aid of a knowledgeable trusts lawyer, you can understand what each type of trust consists of. A beneficial trust you may consider could be an irrevocable life insurance trust, or an ILIT. An irrevocable life insurance trust is a specific type of trust that acts as a life insurance policy for the grantor. Because it is irrevocable, that means once you fund the trust to establish it and once you appoint a trustee to oversee it, the trust cannot be changed or revoked. An experienced life insurance trust attorney may be able to show you the differences between this trust and other trusts that may fit your needs.
How Does an Irrevocable Life Insurance Trust Work?
The primary way an irrevocable life insurance trust works is by using the trust to secure an existing life insurance policy or purchasing one through the trust itself. In doing so, when you die, your life insurance policy will pay out directly into the trust itself rather than be paid out to your beneficiaries. This can be extremely beneficial to your estate, especially if any of your beneficiaries are minors or young adults. An irrevocable life insurance trust would avoid any misuse of the insurance payout if it isn’t paid directly to your underaged beneficiaries. Talk to an estate planning attorney to see if an irrevocable life insurance trust is the right trust for you.
Can an Irrevocable Life Insurance Trust Save Me Money?
An irrevocable life insurance trust can help save significant money when it comes to estate taxes. Because your life insurance payout will be paid into your trust and not as a lump sum to your beneficiaries, the taxes on the life insurance policy may not count against your beneficiaries. Instead, the payout will be distributed in smaller payments to avoid the larger taxes involved in lump sum payouts.
How Can an Estate Planning Attorney Help Me with an Irrevocable Life Insurance Trust?
There are tremendous benefits to be had with an irrevocable life insurance trust that can benefit your family long after you pass away. Simplifying the life insurance distribution process can take the stress away from your estate and allow a little more financial flexibility. Israel & Gerity, PLLC can work with you to optimize your estate plans and protect your family’s future.