VIEWS: 10 PAGES: 2 CATEGORY: Legal POSTED ON: 5/25/2012
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
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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