Retirement Planning Blog

The irrevocable life insurance trust is a special type of a trust which allows the exemption of the life insurance amount for the estate tax that you are paying. However, it cannot be changed which makes it at times unfavorable. In spite of some of the drawbacks, these types of trusts are very much preferred because they provide good benefits and tax savings on the estates.

The main objective of the ILIT (Irrevocable Life Insurance Trust) is to reduce the taxes by a considerable amount. However, you need to go through the decisions to forgo an ILIT as there are regular changes in the estate tax rules which may make your money fluctuate over a short period of time.

Irrevocable life insurance trusts also allow for marital exclusion on an unlimited basis. As such, no estate taxes are applicable on the life insurance proceeds that are paid to the spouse after the death of the main applicant. However, in case of the death of surviving spouse, the proceeds or the amount are transferred to his or her estate.

While setting up an ILIT, it is advisable that you take advice from the attorney. An estate lawyer who is expert in estate planning is the ideal choice. You also need to decide on the trustee, the beneficiary of the life insurance and other factors before deciding on the policy.