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Can I Put Something Other Than Life Insurance in the Trust?

August 04, 2017

Yes. Any asset can be placed in the ILIT.  Sometimes an income producing asset is placed inside of an ILIT to provide an income stream from which to pay the premiums on the life insurance. This technique eliminates any further gifts by the trustmaker/insured to the ILIT for the purpose of paying the life insurance… Read more »

Who May Serve as Trustee of the Irrevocable Life Insurance Trust?

August 02, 2017

To avoid “incidents of ownership,” and thereby pull the insurance proceeds back into your estate for federal estate tax purposes, the Trustee should be someone other than you. A family member may be named as the sole Trustee of the ILIT, but it is usually better to name a professional Trustee, such as an accountant… Read more »

Is the ILIT Useful for Anything Else Besides Keeping Insurance Proceeds Out of the Estate?

July 31, 2017

Another benefit of an ILIT is to place the cash value and death benefit of the life insurance policy beyond the reach of lawsuits and claims against the insured. If the purpose of the insurance is to replace the income that would be lost upon the death of the insured, the ILIT provides a viable… Read more »

How Does an Irrevocable Life Insurance Trust Work?

July 27, 2017

The steps to successfully establishing an ILIT include the following: Your advisors, including your attorney, help to design and create the ILIT. The trustee of the ILIT applies for an insurance policy on your life, or the lives of you and your spouse. You make a gift of the premium amount to the ILIT. The… Read more »

I Thought My Insurance Agent Told Me That Insurance Proceeds are Tax-Free. Did I Miss Something?

July 25, 2017

Life insurance is NOT always tax-free. One of the most common misconceptions about life insurance has to do with its tax status. In virtually all circumstances life insurance is income tax free. The premiums were paid with after-tax dollars and the death benefit is not subject to income tax. However, life insurance is not necessarily… Read more »

What is an Irrevocable Life Insurance Trust?

July 21, 2017

An Irrevocable Life Insurance Trust (“ILIT”) is probably the most frequently used type of irrevocable trust. It’s an irrevocable trust that you can establish to own a life insurance policy on your life. If you personally own a life insurance policy, the policy proceeds will be includable in your taxable estate and subject to estate… Read more »

Are Irrevocable Trusts Somehow More “Powerful” Than Revocable Trusts?

July 19, 2017

In general, the only way to obtain tax advantages using a trust is to give up ownership. Irrevocable Trusts require you to give up legal title (ownership) to any property and that can never be changed. Revocable trusts, on the other hand, do not require giving up ownership and may be changed. But, there are… Read more »

What is an Irrevocable Trust?

July 17, 2017

An irrevocable trust is a trust that may not be altered, amended or revoked by the creator of the trust. The reason you may consider creating an irrevocable trust is because all gifts you make to the trust are treated like gifts made to a “third party,” which means the gifts are excluded from your… Read more »

I Don’t Need the Money From My Father, and I’d Like to Pass it to My Children Instead, Without Any Adverse Tax Consequences. Is That When a Disclaimer Might be Used?

June 26, 2017

Yes. A qualified disclaimer could be the perfect tool to accomplish this goal. If you disclaim your interest in the inheritance after your father is deceased, but before you accept any benefit from the inheritance, the inheritance will pass as though you predeceased your father. In that case we would look to the terms of… Read more »

What is a Disclaimer?

June 22, 2017

A disclaimer is an irrevocable refusal to accept an interest in property. In other words, it is the legal way of saying “no thank you.” The effect of a disclaimer is that the disclaimed property will be treated as if it had never been transferred to the person making the disclaimer. Most states have statutes… Read more »