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Benefits of a Life Insurance Trust

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An Irrevocable Life Insurance Trust (ILIT) is a Trust used to hold your life insurance policy. Upon your death, your life insurance policy can pay into this Trust instead of directly to a beneficiary

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									Benefits of a Life Insurance Trust

An Irrevocable Life Insurance Trust (ILIT) is a Trust used to hold your life insurance policy. Upon your
death, your life insurance policy can pay into this Trust instead of directly to a beneficiary. Your ILIT
Trustee will then use your Trust to pass funds out to your loved ones for a pre-determined amount of
time. You must take special consideration when placing a life insurance policy into an Irrevocable Trust.
This type of trust cannot be changed once it is created. There are, however, many benefits to a Life
Insurance Trust.

Asset Protection

Irrevocable Trusts provide asset protection from your creditors and from the creditors of your
beneficiaries. While items are within a Trust they cannot be used to settle a debt or lawsuit, or to pay
the divorcing spouse of any of your heirs.

Avoid Estate Taxes

By placing your life insurance policy into an Irrevocable Trust those funds will not be included in the
calculation of your estate taxes. If your policy is large, this is a great way to help keep your estate under
the estate tax limitation. For 2010, there is no limit, but in 2011 the limit is expected to return to a
previous low amount of 1 million per estate. Because your spouse will never fully inherit the policy, he
or she can also avoid having these funds federally taxed.

Avoid Probate

Placing items into a Trust allows them to pass outside of probate. Normally if you have a beneficiary
listed on your life insurance policy it can pass beyond probate, but if you do not name an heir then the
policy will endure this timely court process. If you are not sure who to leave your policy to, an ILIT may
be a good choice.

Plan Long Term

You can use your Irrevocable Life Insurance Trust for long term inheritance planning. If your policy is
large, you can have it distribute payments throughout the life of your spouse and your children. You can
even use your ILIT as a generation skipping trust to provide funds to future family members.

Experienced estate planning attorneys Fayetteville AR of the Deborah Sexton Law Office PA offers estate
planning and business planning resources to residents of Fayetteville AR. To learn more about these free
resources, please visit http://www.arkansas-estateplanning.com today.

								
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