Regardless of one’s age and health, the future can be uncertain, which is why it’s important for individuals in the Washington, D.C., area to secure their loved ones through a life insurance policy. However, opening a life insurance policy can leave a person with many questions. One of the most important decisions to make during this part of financial planning is whether or not to put an irrevocable life trust in place.
What is an irrevocable life trust?
An irrevocable life trust, or ILIT, is made up of the grantor who owns the policy, the trustees who give out the policy benefits and the beneficiaries who receive the money. Typically, life insurance policies are made out or changed so that the grantor is the one applying for coverage while the trustee is the owner of the policy.
The benefits of an ILIT
While forming an ILIT can seem like an overwhelming task, many people find that the benefits far outweigh the challenges. After developing an ILIT, estate taxes are significantly minimized, and it’s possible to avoid gift taxes. Working under the best interests of the beneficiaries, the trustee can also work around their need for government assistance, giving them the money in increments that won’t make them ineligible for other benefits.
Is an ILIT right for you?
Not only is an ILIT a positive chance to provide for your beneficiaries in a way that best suits their specific needs, but it also gives you the opportunity to remain in control of your financial giving. Your trustees will work with you to determine how you want the money distributed, and then they will follow your wishes. For instance, if you want to give your grandchild part of the money as a reward for graduating high school, you can set that up specifically with your trustee. As you can see, an ILIT is a good option for anyone who has a large life insurance policy as part of their estate plan that they want directed to paying their beneficiaries in the most positive manner possible.
If you’re considering an irrevocable life trust for your insurance policy, then it’s important to work alongside the guidance of a professional estate law attorney. A lawyer may help you understand how an ILIT will affect you as well as offer guidance through the process.