Loudonville, Ohio                  

Irrevocable Life Insurance Trusts

     A life insurance policy that is either owned by an individual or has the individual’s estate listed as the beneficiary of the policy is considered part of the taxable estate of the individual upon death. It is a non-probate asset, but will still be subject to state and federal estate taxes. The purpose of an Irrevocable Life Insurance Trust (commonly referred to as an "ILIT") is to take the life insurance out of the name of the insured in order to prevent taxation on the amount of the policy. By doing this, you are potentially able to keep your estate under the $1,500,000 federal estate tax exemption, thus avoiding federal estate taxes, while at the same time leaving to your loved ones an amount greater than $1,500,000. Alternatively, this type of trust at least allows you to keep some of your estate over $1,500,000 tax-free, while maybe not entirely eliminating federal taxes. The amount of the life insurance policy is then available to your heirs to either purchase assets from your estate (perhaps to transfer a family-owned business under a pre-arranged buy-sell agreement) or just to provide liquid assets to be available to pay any taxes that may be due.

     This is a simplified explanation of ILIT’s; keep in mind that there are stringent guidelines regarding ILIT’s that must be followed for this type of trust to work, and it is important to seek competent legal counsel to assist you in determining whether an ILIT is appropriate for you and to assist in creation of such a trust. Typically, an ILIT is used in conjunction with a Complete Estate Planning Package, discussed in the living trust section of this site.

     To contact me in order to set up a no obligation appointment to discuss your personal estate planning needs, click here.

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