Life insurance is a common financial item purchased by millions of Americans. It provides the named beneficiaries with monies after a death to replace earnings, to send kids to college, to pay the mortgage, to cover burial costs or unpaid taxes. For most people, the beneficiaries are children, grandchildren or other close family members.
Like most trusts, the Irrevocable Life Insurance Trust (ILIT) is simply a holding device. The insurance trust owns your insurance policies for you. Since you don’t personally own the insurance, it will not be included in your estate, so your estate taxes are greatly reduced.
As its name suggests, the Irrevocable Life Insurance Trust cannot be altered, changed, modified or revoked after its creation. Once a property is transferred to an irrevocable trust, no one can take the property out of the trust.
How ILIT Works
An insurance trust has three components.
- The grantor is the person creating the trust — that’s you
- The trustee is the person you select to manage the trust
- The trust beneficiaries you name will receive the trust assets after you die
When the insurance benefit is paid after your death, the trustee will collect and distribute the funds to the beneficiaries in accordance with your instructions.
Some of the benefits an ILIT can help you achieve are:
- It will reduce the size of your estate and your estate tax liability.
- It will help you protect the cash value of your life insurance policy from creditors.
- It will allow you to control, when, how, and why your beneficiaries receive the proceeds of your policy.
- It will not be subject to probate.
“All this may sound complicated, but our legal team at Voeller Law Firm has over 35 years in estate planning. We have the knowledge to guide individuals and families toward strategies that will maximize their estate’s earnings and minimize tax requirements,” stated Jim Voeller from his San Antonio law offices. “Proper estate planning is one of the greatest acts of love you can give to your family.”
To learn more about estate planning call us today to schedule a free consultation at (210) 651-3851 or log onto http://www.voellerlaw.com.