The Benefits of a Life Insurance Trust

A life insurance trust or also called, irrevocable life insurance trust, or ILIT is a powerful estate planning tool. If the trust is set up and operated properly, assets in the trust will go to your beneficiaries free of income tax, capital gains tax, estate tax and inheritance tax. Those assets will also be protected from other people who may want to get at the money such as creditors and ex-spouses.

At Morris Hall, PLLC, our lawyers do more than create irrevocable life insurance trusts. We also help you operate your trust correctly so your beneficiaries will receive all of the tax advantages and protections you are seeking.

Protecting Your Beneficiaries

An irrevocable life insurance trust should be set up to distribute to a beneficiary trust to protect the beneficiaries from creditors, bankruptcy, ex-spouses, long-term care expenses and tax consequences. When placed in a beneficiary trust, the assets are available for your beneficiaries to use, but creditors and predators can’t touch it.

Once set up, the irrevocable life insurance trust must be properly funded. For example, premium payments must be made as gifts. When making premium payments, you must provide what are known as Crummey notices (named after the Crummey family which first attempted this technique) to your beneficiaries to avoid gift tax consequences. The form and timing of the Crummey notices are very specific and critical.

Our lawyers have reviewed hundreds of irrevocable life insurance trusts that have not been set up and operated correctly. We have seen many firms advise improper methods of giving and responding to the Crummey notices, which causes gift and estate tax problems.

Morris Hall offers a full range of estate planning strategies to minimize taxation and protect the assets you built up over a lifetime. For more information about irrevocable life insurance trusts, contact us to arrange a consultation with an experienced attorney today. Our offices are located in Phoenix, Tucson, Albuquerque and communities throughout Arizona and New Mexico.