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?
Why use an Irrevocable Trust?
After considering the alternative, an Irrevocable Life Insurance Trust is indicated where the donor does not have confidence that the recipients of the gifts will cooperate in retaining the policies or their proceeds and making them available to the donor's estate for payment of taxes, or where the gifts are made to minor or other beneficiaries, who do not have the capacity or judgment to manage the policies proceeds.
Therefore, a benefit of using an Insurance Trust is that a Trustee can be chosen who understands the goal of providing liquidity for payment of taxes, and in that way there is more certainty that the proceeds will be used for the intended purpose, at the insured's death.