I’m proud to pay taxes in the United States; the only thing is, I could be just as proud for half the money.
What Is an ILIT?
An ILIT is created by an individual (the grantor) during his or her lifetime. The ILIT owns a life insurance policy on the grantor’s life via the transfer of ownership of an existing policy, or through the grantor’s annual contribution of cash to pay the premiums on a policy purchased by the trust.
The grantor designates beneficiaries, usually family members, who will typically receive the proceeds upon the death of the grantor.
The trust is irrevocable, meaning that the grantor forfeits all rights to the property contained in the trust. Its irrevocable nature is integral to accomplishing the ILIT’s objectives.
What Can an ILIT Accomplish?
Providing income to survivors.
How Does an ILIT Work?
The trust provisions should be set up to provide direction about how and to whom payments may be made. You may direct that the trust pay out cash to cover certain expenses, e.g., funeral costs, probate, taxes, final medical expenses, and debts.
This may obviate the need to sell less liquid assets at an inopportune time to cover such costs.
The trust’s beneficiaries may receive the proceeds (after any payments are made to satisfy liquidity needs), creating an inheritance free of estate taxes.
Finally, creditors should not be able to attack these assets since they belong to the trust, not you.
Creating an ILIT should be done only with the assistance of a qualified estate planning attorney. It is a complicated exercise in which mistakes may result in losing the benefits ILITs offer.
Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.
Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.
This is a hypothetical example used for illustrative purposes only. It is not representative of any specific estate or estate strategy. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.
Have A Question About This Topic?
Thank you! Oops!
When Do You Need a Will?
When do you need a will? The answer is easy: Right Now.
How federal estate taxes work, plus estate management documents and tactics.
Check the background of your financial professional on FINRA's BrokerCheck.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.
Copyright 2019 FMG Suite.
Amida Wealth Advisors LLC is an independent firm with securities offered through Summit Brokerage Services, Inc., Member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a Registered Investment Adviser. The Representative associated with this page is registered to conduct business in the following states: AL, CA, FL, IL, NJ, NY, and WA.
Ana Ramos, Founder of Amida Wealth Advisors, LLC, is a licensed Insurance Agent.
