The grantor (as an individual or couple) transfers their assets to an irrevocable trust. However, unlike other irrevocable trusts, the grantor can be the income beneficiary. Their children or spouse would be the residual beneficiaries.

Who is the beneficiary of an irrevocable life insurance trust?

An ILIT is an irrevocable trust that contains provisions specifically designed to facilitate the ownership of one or more life insurance policies. The ILIT is both the owner and the beneficiary of the life insurance policies, typically insuring the life of the person or persons creating the ILIT, known as the grantor.

How does an irrevocable life insurance trust work?

as the trust is invested only in insurance policies, the trust will not have any taxable income, and, therefore, the grantor will not report any income. Conclusion An irrevocable life insurance trust may not be an attractive tool for everyone, but it may

Can a grantor revoke a life insurance trust?

An ILIT is a legal entity established under state law via a statute or written agreement to own a policy on the life of a grantor, which is typically the person who creates the trust. Crucially, the grantor cannot amend or revoke the ILIT after establishing it.

Can a grantor contribute to a life insurance trust?

Each year, the grantor must make annual contributions to the trust to provide the funds needed to pay the premiums. An ILIT can be a great way to seek tax relief from your life insurance proceeds. However, as with all personal finance matters, every person has a unique set of circumstances.

What happens to life insurance proceeds after death?

of the life insurance proceeds after the grantor’s death, as the grantor of the trust dictates who and when an individual will receive any part of the insurance proceeds. The dispositive provisions of the irrevocable life insurance trust may follow the dispositive provisions of grantor’s other estate planning documents.