Creating an all-inclusive estate plan requires more than just a Last Will and Testament. Exactly which additional documents and strategies should be included in your estate plan is something that should be determined in consultation with your estate planning attorney; however, there are some common additions that you may wish to consider. An Irrevocable Life Insurance Trust, or ILIT, for instance is a popular addition to an estate plan because of the tax benefits it provides and the estate liquidity it offers.

What Is an Irrevocable Life Insurance Trust?

As the name implies, an ILIT is an irrevocable trust. An irrevocable trust is one that cannot be changed, modified, or revoked by the maker of the trust after the trust takes effect. For this reason it is important to work closely with your estate planning attorney when creating an irrevocable trust to ensure that it accurately reflects your wishes and will achieve the intended goals. In the case of an ILIT, the goals would be to avoid gift and estate taxes and provide liquidity to your estate.

When you die, all assets owned by you potentially become part of your probate estate. Assets that are required to go through probate are not immediately available to the intended beneficiary. If the bulk of your assets are probate assets your loved ones may find themselves in a financial bind because the estate lacks liquidity. How will your family pay the bills? How will your funeral and burial expenses be covered? How will gift and estate taxes be paid without selling assets? An ILIT may be the answer to all of these questions.

An ILIT is structured like any other trust in that you must appoint a trustee, create terms, and designate beneficiaries of the trust. Your trustee then purchases a life insurance policy on your life and names the ILIT as the beneficiary of the policy. You will provide the funds for the premium payments. At the time of your death, the life insurance policy then pays out to the trust. Because the trust is an irrevocable trust, any assets held by the trust are considered trust property, meaning that the assets are not included in your estate assets for purposes of calculating gift and estate taxes.

Creating an Irrevocable Life Insurance Trust in St. Louis

More important to your loved ones is that the proceeds of the policy are available shortly after your death, providing much needed liquidity to your beneficiaries. If you believe an irrevocable life insurance trust in St. Louis would make a valuable contribution to your estate plan consult with your St. Louis estate planning attorney.