The AE Team
Irrevocable Life Insurance Trust
- What is an Irrevocable Life Insurance Trust?
- Why use life insurance to pay estate taxes?
- How is life insurance “structured” to avoid taxes?
- Do you have to use an Irrevocable Trust to own life insurance?
- Why use an Irrevocable Trust?
- How does an Irrevocable Life Insurance Trust work?
- Are there any limits to the gifts made each year?
- What does the Trustee do with the gifts received?
- What happens when the Grantor (Insured) dies?
- What if Congress changes the exemption amounts?
What happens when the Grantor (Insured) dies?
Upon the death of the insured person(s), usually the Grantor(s) of the Trust, the Trust will be beneficiary of the Life Insurance Policy and receive the policy death benefit free from tax. The Trustee may then distribute the trust assets to your named beneficiaries in accordance with your wishes or use trust assets to buy assets from your estate, thereby providing liquidity to pay estate taxes without having to sell estate assets such as real estate, securities or business interests.