Estate planning can be stressful and overwhelming so it is important to provide your clients with the most effective tools to achieve their goals. The Irrevocable Life Insurance Trust, or ILIT, is one of the most common estate planning techniques in use today. It removes the death benefit of a life insurance policy from the grantor’s estate. By removing the asset from the estate, the benefit of the life insurance policy passes to the beneficiaries of the trust free of federal estate taxes.

There are many reasons why an ILIT could be a great tool for your client. Here are some of the top reasons:

Estate Tax Advantages:

Life insurance is generally void of income taxes, so by placing the policy in an ILIT, the full benefit is passed to your client’s beneficiaries completely tax free. The level of federal estate taxation has been fluid over the decades and while today’s federal estate tax exemption is higher than in years past, the situation may not be the same tomorrow.

Added Control of Distribution with an ILIT:

The use of a trust to hold the policy gives your client the ability to set the terms of the distribution of the trust assets, including the life insurance benefit. This gives beneficiaries more control over one of the most significant assets your client has, even after they have passed away. 

Additionally, use of an Irrevocable Life Insurance Trust can give clients peace of mind that a separate asset will be passed down to their heirs, free of any interference or reduction in value, allowing the beneficiaries to enjoy the assets the client has put aside for them. 

Asset Protection with an ILIT:

Besides tax relief and added control, an irrevocable trust provides asset protection. The trust is a separate entity, so if sued, the trust and its benefits will be secure and available for your client’s heirs. 

Protection for Beneficiaries:

An ILIT can help protect the life insurance proceeds from the claims of creditors or ex-spouses of the beneficiaries.  

Probate Avoidance with an ILIT:

An ILIT can help your clients avoid the probate process, which can be time-consuming and expensive.  

Life Insurance Trusts can be beneficial for many estate plans. By taking advantage of an Irrevocable Life Insurance Trust, you can assure your clients that their financial goals will be met, and they can enjoy the fruits of their labors while feeling secure in the knowledge that they will be passing along a significant asset to their heirs. 

To find out how you can provide peace of mind for your client in their estate planning process through an ILIT and how Life Insurance Trust Company can help you manage the liabilities and duties associated with an ILIT, send an email to Jacque Metcalfe.