Irrevocable Life Insurance Trusts (ILIT)
An Irrevocable Life Insurance Trust (ILIT) is a legally constructed entity that can purchase or benefit from a life insurance policy.
The trust document will appoint a trustee to administer the assets that are owned by the trust and will provide the terms under which they should be administered. The document will also designate beneficiaries and detail the terms by which the beneficiaries will receive benefits from the trust. An ILIT cannot be rescinded, amended, or modified, post creation. Once the grantor contributes property or life insurance death benefits to the trust, he or she cannot change the terms of the trust or reclaim any of the properties held within. As an alternative to naming an individual beneficiary, ILITs offer several legal and financial advantages to heirs, including favorable tax treatment, asset protection, and the assurance that the benefits will be used in a manner concurrent with the benefactor's wishes.
