First things first – we need to create an Irrevocable Life Insurance Trust. Even though after all the steps are performed, and you cannot change the Trust, the good news is that you have a good amount of control in creating the Trust at the beginning. You can pick who will serve as the Trustee (the Trust manager), and decide how much control you will build into the Irrevocable Trust in managing the distribution of the benefits. The next step is to acquire a life insurance policy for the Trust to hold with the Trustor (the Trust creator, you) as the insured and the Trust as the owner. The insurance premiums will be paid by the Irrevocable Trust in a special way. You will make transfers to the Trust and utilize your annual gift tax exclusion further reducing your potential federal estate tax exposure (please see my blog here for a discussion of Federal Estate Tax: how much is federal estate tax ). The Trustee of the Irrevocable Trust will tell the beneficiaries that they can withdraw the money if they so choose via something called Crummey Letters. The beneficiaries would rather keep the insurance policy in place and choose not to withdraw the money. The Trustee then pays the policy premium.
There are many restrictions and requirements in how the Trust is drafted, and how it is maintained in order for this Irrevocable Trust to function as intended. Please see my Blog for continued discussion of various aspects of ILIT Trusts.
Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today. If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose.
See lots of estate planning information on my website at: www.myestate-plan.com
Thanks for reading my blog.
William Daniel Powell
This document is for informational purposes only. Nothing in this is to be considered legal advice. Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship. If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction. I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.
Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.