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What Is An Irrevocable Life Insurance Trust (ILIT)?

Answer by Miami Trust Attorney Phillip B. Rarick, Esq.

The most common purpose of the Irrevocable Life Insurance Trust (“ILIT”) is to help preserve the full value of the policy by protecting the insurance proceeds from the U.S. federal estate tax – currently at a  40% rate.

The ILIT is the owner and beneficiary of life insurance policies, usually on the lives of the donor and the donor’s spouse. Since the trust, and not the donor, owns the policy, the insurance proceeds will not be included in the donor’s federal gross estate. ILITs allow clients to replace the value of estate assets given to charitable entities. They are also beneficial for clients who wish to increase the value of assets left for their heirs at reduced tax costs. Life Insurance Trusts are generally structured so that the initial gift and subsequent gifts to the trust qualify for the annual gift tax deduction.

Read More: How does an Irrevocable Life Insurance Trust Work?

Disclaimer

The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an attorney that is experienced in Florida estate planning law. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.

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