Irrevocable Life Insurance Trust Attorneys
Serving Sherman Oaks & Glendale CA
What is an Irrevocable Life Insurance Trust?
An Irrevocable Life Insurance Trust is a type of irrevocable trust that holds life insurance as the asset. It cannot be revoked, modified or terminated. By transferring life insurance into an Irrevocable Life Insurance Trust, the grantor (person who is establishing the trust) can effectively remove his or her ownership rights over that life insurance policy, thereby removing the life insurance proceeds from their taxable estate. (The Irrevocable Life Insurance Trust can also purchase a new life insurance policy on the grantor’s life).
What is the purpose of this type of trust?
A Irrevocable Life Insurance Trust has several objectives:
1) it helps provide liquidity for the grantor’s estate
2) value of the life insurance policy is excluded from the grantor’s taxable estate
3) shelter property from creditors at death
4) provides a surviving spouse with liquidity.
An Irrevocable Life Insurance Trust can be funded using an existing life insurance policy, or a brand new policy can be purchased by the Trustee of the Irrevocable Life Insurance Trust.
Who pays the life insurance policy premiums?
Even though your trust will own the life insurance policy, you can still pay the premiums through a series of simple steps. You can make a gift of the necessary amount to the trust and the trust can use these sums to pay the premiums on the policy. A few formalities must be followed in order to comply with certain rules and regulations.
How does an Irrevocable Life Insurance Trust work?
First, you create an irrevocable life insurance trust and name someone else as trustee. You designate who you want to be the beneficiary and various other terms of the trust such as how distributions are to be made.
Second, you transfer your existing life insurance policy into the trust, making the trust the owner of the life insurance policy.
Third, you make gifts of money to the trust. The Trust uses these sums to pay the premiums on the life insurance policy as discussed above.
A comprehensive estate plan should implement not only your wishes but also consist of different estate planning tools, such as an irrevocable life insurance trust, to help save you estate taxes and facilitate a smoother administration of your estate.
If you have questions regarding Irrevocable Life Insurance Trust and how they can benefit you, please contact us at (818)649-9110 or email us at email@example.com for a free consultation. Trusts can be confusing. Our Sherman Oaks and Glendale living trust attorneys will help you setup and work out the differences.