Irrevocable Life Insurance Trusts
Irrevocable Life Insurance Trusts, commonly referred to by estate planning professionals as "ILITs," are one of the most common types of trusts used in estate planning in the United States. The ILIT is irrevocable, so it is permanent and cannot be undone. That's the first of many reasons why you should seek the advice of an estate planning attorney if you are considering forming an irrevocable life insurance trust. The ILIT is an advanced strategy, commonly used for those who expect their estate to be taxed after they pass away. Therefore, these types of trusts are not necessary for those with gross estates under approximately $10 million.
Essentially, the irrevocable life insurance trust owns an insurance policy on the life of the person creating the trust, a.k.a. the "grantor." This strategy keeps the insurance policy out of one's federal gross estate. When the grantor/insured person dies, the policy is paid out to their beneficiaries who can then take the funds and pay off any of the insured's estate taxes. There are many other advantages to using an ILIT, but you should consult with an attorney before going down that path.
There are companies out there that offer quick, cheap trusts. They market to people who are looking for a deal, and they provide terrible products that have not been drafted by attorneys licensed within their customers' jurisdictions. As you can guess from above, most people don't even need trusts as a part of their estate plans. At Barber Power Law Group, our experienced estate planning attorneys create a unique estate plan for every single client that comes through our door. We draft each estate planning document, including trusts, by hand to ensure that our clients' objectives are accomplished. We seek to maximize our clients' legacy while minimizing taxes on their estates.
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