ILIT

The ILIT will be funded either from the client’s existing life insurance policies or with a new policy.* The ILIT will be established by the client and the client will name a trustee to administer the ILIT. The client’s spouse may serve as a co-trustee if desirable. The trustee will pay the insurance premiums using amounts that the client contributes to the ILIT’s checking account. However, if properly structured, the client’s contributions will not constitute taxable gifts. By implementing an ILIT, the client will move money out of his or her estate and protect it from estate taxes. Also, the ILIT may provide money for the client’s family to pay any estate taxes on other assets and administrative costs of the client’s estate.

* If the client uses an existing policy and does not survive for more than three years after the funding date, the proceeds will be part of client’s estate. Therefore, it is preferable to fund the ILIT with a new policy.

At Predeceasing Spouse’s Death

The proceeds from the life insurance policy held in the ILIT will flow to the ILIT free of federal income and estate tax. Additionally, proceeds may be used to support the client’s surviving spouse and/or the client’s descendants during the surviving spouse’s remaining lifetime. The insurance proceeds held in the ILIT will not be included in the surviving spouse’s estate upon his or her subsequent death.

At Surviving Spouse’s Death

Upon the death of the surviving spouse, the remaining proceeds may be distributed directly to the client’s descendants or may remain in separate lifetime trusts for the benefit of the client’s descendants. The assets in each descendant’s trust may be used for any purpose the client desires. A descendant’s access to these funds may be carefully tailored to meet the client’s wishes.