We all know the importance of having life insurance to provide for your families in the event your death. While taking out a policy is a responsible thing for you to do for your family, there is one additional step that is crucial to take in order to prevent Uncle Sam from potentially being the beneficiary of more than half of the proceeds of the policy. That is, you should set up an Irrevocable Life Insurance Trust (ILIT). By doing so you will make the ILIT the owner of the policy. The fact that it is irrevocable means you cannot change the terms once it has been signed. You must also choose someone else as trustee of the ILIT other than you or your spouse. Furthermore, you cannot be a beneficiary of the ILIT , but your children can be and usually are beneficiaries. Quite often the ILIT parallels the dispositive provisions of your revocable living trust or other estate plsnning documents.
The IRS has approved the ILIT concept when all the technical requirements are met. If you presently have a large life insurance policy or are contemplating purchasing one , consider the benefits of setting up an ILIT. If you would like to discuss this further you may call me at 718-377-8880 or send an e-mail to [email protected].
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