The ILIT is short form for Irrevocable Life Insurance Trust. As its name implies, once constructed this trust fund is not revocable, nor may you make any major changes to it. In other words, once you set up the ILIT, the money does not come back to you. The ILIT owns your life insurance policy for you, removing the value of you life insurance from your estate. If you are wondering if this type of trust can be used to help protect your estate, you need to talk to a Tax Professional, such as those at Wealthy Living for Me in Durham, North Carolina.
This person can help you to set up your estate planning so that it is protected from the IRS and from any creditors that you have. The ILIT can reduce or even in some cases eliminate the death taxes owed by your estate when you pass. However, because of some of the features of the ILIT, it may not be suitable for everyone. The ILIT can do many beneficial things for your estate and your loved ones. Among other benefits, it can :
There are other benefits that come from a good ILIT. Setting up the ILIT can take care of life insurance policies. These policies are usually paid out in full right after you pass away, which means that the money from the trust will be available when needed to pay for your estate taxes. This can prevent the sale of your tangible assets and leave more money for your heirs. However, once the ILIT is set up, the money inside it cannot be withdrawn for any reason by you or your spouse.
You do need to name a trustee for your ILIT, and this trustee cannot be you or your spouse. If you name yourself or your spouse as trustees of your ILIT, the IRS is likely to conclude that your assets have not in fact left your estate and everything covered by the ILIT will be included in your estate tax.
One way that is recommended to find a Trustee for your ILIT is to make a bank or other institution your Trustee. This is called a “Corporate Trustee” . It is the duty of the trustee to manage the money you have in your trust. For instance, the Trust will send you a bill for you life insurance policy; you then pay the life insurance policy to the Trustee and the Trustee sends it on to your life insurance company.
Having a Corporate Trustee will discourage the IRS from taking an interest in your life insurance policy. The payment for the insurance policy will be handled as a gift. Your Tax Professional can explain in more detail, because the details are regulated by the IRS and they change every year. If you need a tax professional, as opposed to a Tax Preparer, Wealthy Living for Me in Durham, NC can help you find a reliable Tax Firm. The tax professionals that Wealthy Living For Me in North Carolinamay refer you to may include an Accountant. Accountants are able to function as a Tax Preparer, but they are much more than that.
Gifts of money, which are used to fund the ILIT, are regulated by the IRS. In order to find out how much you can contribute to your ILIT without paying a penalty on the gift, you need to talk to an experienced tax attorney. Wealthy Living for Me in Durham, North Carolina can refer you to someone who can explain how much the IRS will allow you to gift to the ILIT without affecting the amount you can give to someone else. This means that depending on how much you spend on Life Insurance, the amount you spend for that purpose will not be noticed by the other people you send gifts to.
One point of the ILIT is that this type of trust is designed to allow you to retain control over your estate. For example, if you were to allow your child to be beneficiary of the money, that child could use the money in the policy before you passed away, leaving you unprotected. This is one of the reasons it is wiser to go to an experienced tax professional, like the ones recommended by Wealthy Living For Me.
Cassandra Collins-Patterson