Life insurance policies are considered part of your estate for tax purposes in several states across the United States. Therefore, beneficiaries may not be taxed directly. However, the estate experiences taxation of 55%. Ultimately, an Irrevocable Life Insurance Trust (ILIT) serves as a valuable resource in avoiding massive tax implications.
The Function of an Irrevocable Life Insurance Trust (ILIT)
Initially, Irrevocable Life Insurance Trusts (ILITs) were created by a South Florida estate planning attorney. By drafting ILITs, the attorney’s efforts removed life insurance from the policyholder’s estate, increased asset protection, and reduced taxes overall. ILITs enable policyholders to designate an individual, such as a child or spouse, as the trust’s beneficiary. Furthermore, the policyholder can provide directions to the ILIT trustee, detailing the distribution of the life insurance payout, timing of payments, investments, and more.
The Importance of Being Irrevocable
The term “irrevocable” implies that the trust is unchangeable throughout its policy length. Essentially, this detail prevents the grantor from changing the terms of the trust, who the beneficiaries are, and the circumstances or conditions surrounding the receipt of assets. Additionally, suppose a grantor transfers an existing life insurance policy into an ILIT. In that case, there is a default three-year lookback period wherein the grantor’s estate may include the death benefit.
Estate Planning Made Easy
An Irrevocable Life Insurance Trust (ILIT) assists with increasing available assets for various beneficiaries by making it easy to own multiple life insurance policies. The trustee maintains the trust document, and it serves as a reliable road map surrounding the distribution of proceeds, among others.
Contact Information:
Email: [email protected]
Phone: 8668727470
Bio:
Mark Zimmerman, Sr currently is the Managing Member of Aurifex Financial Group, LLC. Aurifex Financials mission is to help clients realize their vision of living life on their own terms by providing credit repair, financial counseling, insurance solutions, and money lending services. This is accomplished by using a holistic approach. After hanging up his uniform after 22 years of service in the military, Mark still had a desire to help others, so he created Aurifex Financial.As part of Accredited Financial Counselor (AFC) credentials, Mark had to obtain and document over 1000 hours of helping others which was accomplished by helping hundreds through a local non-profit. As an independent Insurance Agency, Mark is licensed in property and casualty, home, business, health, Medicare, life, and annuity products.
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