When we talk about irrevocable life insurance trust, you might find it a bit complex to understand considering all the issues surrounding it. What is this all about? How does it affect me as a policy holder? What are my obligations under the current law? What are the necessary steps to have it? - These are just a few questions that could puzzle you if you are not knowledgeable enough on the matter.
So, what does irrevocable life insurance trust really all about? A good article published on lawyers.com explains that it is a way you can choose to "avoid estate taxes on your insurance proceeds" as any value over $5.12 million is "subject to federal estate tax at the rate of 35 percent."
In other words, ILIT can help to meet the liquidity needs of the grantor's estate - like it can help avoid the estate taxation of the death proceeds. Aside from that, it can help provide for the income needs for the loved ones, which is, of course, after liquidity costs have been settled.
Features of Irrevocable Life Insurance Trust
If you are consulting an estate planning, trusts, and probate lawyer, he should be able to explain to you some of the features ILIT has, including the following:
- Is established while the grantor is still alive.
- Members of the family - spouse, children, grandchildren, etc. - are usually the beneficiary of this system.
- it is funded by the grantor's life insurance policy
- Annual premium is paid by the trustee, unless the policy is paid up.
The 'funding' alternatives
Irrevocable life insurance trust can be both 'funded' and 'unfunded'. Meaning, it is 'funded' when the policy is transferred to the trust together with other property from which the premium payments may be done. 'Unfunded' insurance trust is when the trustee put no other property into the trust; the premium payments are based on the cash gifts from the grantor.
So, what does irrevocable life insurance trust really all about? A good article published on lawyers.com explains that it is a way you can choose to "avoid estate taxes on your insurance proceeds" as any value over $5.12 million is "subject to federal estate tax at the rate of 35 percent."
In other words, ILIT can help to meet the liquidity needs of the grantor's estate - like it can help avoid the estate taxation of the death proceeds. Aside from that, it can help provide for the income needs for the loved ones, which is, of course, after liquidity costs have been settled.
Features of Irrevocable Life Insurance Trust
If you are consulting an estate planning, trusts, and probate lawyer, he should be able to explain to you some of the features ILIT has, including the following:
- Is established while the grantor is still alive.
- Members of the family - spouse, children, grandchildren, etc. - are usually the beneficiary of this system.
- it is funded by the grantor's life insurance policy
- Annual premium is paid by the trustee, unless the policy is paid up.
The 'funding' alternatives
Irrevocable life insurance trust can be both 'funded' and 'unfunded'. Meaning, it is 'funded' when the policy is transferred to the trust together with other property from which the premium payments may be done. 'Unfunded' insurance trust is when the trustee put no other property into the trust; the premium payments are based on the cash gifts from the grantor.
About the Author:
Priyam Shukla writes various professional topics, including law, accounting, marketing, and consulting - she is a freelance writer. If you want to learn more about estate planning, visit that useful resource from Sweeney, Mason, Wilson, and Bosomworth - a professional law corporation.
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