What is an ILIT?
Irrevocable Life Insurance Trust, that’s what ILIT stands for. It is a trust that has a fairly unique and limited purpose of protecting life insurance proceeds from being added to an estate which is large enough to be subject to estate tax. This is done by making the Trust the owner of the life insurance policy and treating the funding of the Trust by the insured, as a gift to the beneficiaries.
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Professional ILIT Advantages
Tax Free Money for Your Estate
That’s it in a nutshell. The life insurance proceeds from an ILIT will be excluded from any estate taxes. In addition, the funds are fully available to use for payment of estate taxes that are incurred on non-liquid property, such as real estate, valuable artwork or business ownership. The growing cash value on the life insurance policy is not taxable as it accumulates and remains tax free when distributed to the beneficiaries.
There are several other benefits that can be realized by the establishment of an ILIT. Provisions may be made to provide income to a spouse through an ILIT during their lifetime and the proceeds of an ILIT do not need to go through probate before being released. In addition, an ILIT allows an opportunity to take advantage of the annual gift tax exclusion, which is a tax benefit that is not applicable in very many scenarios. Creating an ILIT to fund an inheritance for grandchildren also has expanded tax advantages that might not be available through other means.
Professional ILIT Disadvantages
The biggest disadvantage of an ILIT is that it is an irrevocable trust; that means that it cannot be changed or revoked. You cannot even change the beneficiaries, once it is established. Therefore, it is not a step to take without serious consideration for the future.
Policy Owned by the Trust
Unlike an ordinary life insurance policy held by the insured, an insurance policy that is held by an ILIT is owned by the Trust. Therefore, you will not be able to borrow against the policy, as you might if you owned an insurance policy outright.
Fees and Filing
There are administrative fees and governmental filings which may be required with an ILIT; however, these fees are generally considered minimal in relation to the tax savings provided to your estate.
“Both internationally and across the U.S., clients and their teams of financial advisors have placed their confidence in us with regard to their Professional ILITs. Provident Trust has over $3 billion in assets currently in custody with their list of over 30,000 clients.”
The Provident Trust Advantage
Provident Trust does not sell life insurance and is not affiliated with any bank or financial institution. Assisting our clients in accomplishing their goals is our top priority. Our clients have learned to rely upon our timely and extremely personalized service.
Complex Transactions Simplified and in Full Compliance
Provident Trust is owned and operated by a team of tax attorneys and highly qualified professionals who focus on simplifying the complex nature of personal and business finance. We make sure that every reporting requirement for the IRS and the State is met and that our clients are fully informed in regard to the requirements related to establishing and maintaining a Professional ILIT.
All it takes is a phone call, to begin your relationship with the professionals at Provident Trust, though we’d be happy to meet you in person at our Las Vegas office as well.
Give us a call at (888) 855-9856. We’d be happy to answer your questions related to setting up a Professional ILIT to help protect your estate from being diminished by unnecessary estate taxes.