An ILIT is an irrevocable trust which owns life insurance policies, and thus removes the insurance proceeds from your taxable estate.

      The trust is considered the owner of the life insurance when you die, the life insurance is excluded from your gross estate unless you die within three years of the transfer. In that case, the entire value of the policy is brought back into your estate for federal estate tax purposes. 

 

Living Trust:

•A trust to hold assets. Other names: family trust, revocable trust, and inter vivos trust

•Grantor establish the trust

•Trustee

•Purpose: avoid the probate, protects the decedent’s privacy.

Why Living Trust?

ILIT Offers Solutions to Both Estate Tax Problems:

•1. Ownership Problem: Because the ILIT is an entity separate and distinct from the settlor, when the settlor dies he or she does not own the policy. Therefore, the tax laws that require estate taxation of insurance owned by the insured will not apply.

•2. Spousal Beneficiary Problem: As explained above, the ILIT is structured to provide for the settlor’s spouse without causing the proceeds to be included in his or her estate. Therefore, upon the death of the surviving spouse, the full trust principal (including any appreciation) passes to the beneficiaries without being diminished by taxation.

What the Living Trust Can NOT Do?

It can NOT avoid Estate Tax

It can NOT protect the owner from creditor 

                                        ** Please contact professional attorney to set up ILIT, here just for your reference purpose only **