What is an Irrevocable Life Insurance Trust (ILIT)? Kirkland Estate Planning Attorney Knowledge

Yes, this is another one of those informational posts.

Here’s the way I see these posts.

Have you ever played a sport? Ever played an instrument? Ever really learned a subject really in depth?

If you said yes to any of those things, than you’ll get why I’m doing these posts.

You Have to Walk Before You can Run

Estate planning shouldn’t be something you don’t understand.

In fact, it doesn’t have to be something you don’t understand.

What estate planning attorneys often do, though, is jump in right in the middle and start explaining stuff.

Instead, just like when you are learning something new for the first time, it’s critical to learn and understand the fundamentals before you try to go off and do something higher level.

That’s why I’m writing these definition posts. It’s important for you to know what it is I’m talking about.

My hope is as you begin to understand these concepts (which are not overly complicated, we just name them that way so people will think we’re smart) you will begin to get a more comprehensive understanding of how your estate plan fits together (both within the estate plan itself and as it relates to your financial planning, accounting, and other areas).

Okay, now that we got that out of the way, let’s talk about irrevocable life insurance trusts.

What is an Irrevocable Life Insurance Trust?

An irrevocable life insurance trust is a trust (any word that is highlighted you can click on to get the definition of that word) whose only piece of property is a life insurance policy.

But this trust isn’t your garden variety trust. It has a couple of special qualities.

First, this trust is irrevocable. That means, absent some pretty specific circumstances, once you create this trust and put the life insurance policy in it, it’s staying there (the life insurance policy). You cannot take the policy back into your own name.

Second, because this trust is irrevocable, you are not the trustee. Usually it’s a bank or someone else (you get to appoint the trustee).

Third, you get to name the beneficiaries.

Fourth, you get to dictate the terms upon which the funds are distributed (just like any old trust).

How Does an Irrevocable Trust Work?

It’s pretty simple, really.

First, you create the trust and appoint the trustee (not you).

Second, the trust (not you — this is important) purchases an insurance policy on you.

Third, when you die, the trust receives the life insurance proceeds and distributes them as you have set forth in the trust.

Why Create an Irrevocable Life Insurance Trust?

Great question.

Let’s answer that next…

Cheers,

Christopher Small

P.S. After helping dozens of families set themselves up for an awesome life and an amazing legacy, I can tell you if you don’t have these 5 areas of your life covered right now you are exposing yourself and your family to a lot of heartache.

P.P.S. Figuring out where to start and taking the first step is the hardest part of creating your family wealth plan. Here’s my best advice on where to start and how to take the first step (without needing an estate planning lawyer).

Who am I? I’m a Kirkland estate planning attorney who enjoys helping people get rich and live forever. This isn’t a job for me, it’s actually something I enjoy. And it’s my pleasure to share this stuff with you.

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