IRREVOCABLE TRUST AGREEMENT WITH LIFE INSURANCE PROVISIONS 2025

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ILITs can protect beneficiaries government benefits by controlling distributions to maintain eligibility. Contributions to an ILIT can avoid gift taxes through the use of Crummey letters. An ILIT shields life insurance cash value and death benefits from creditors, enhancing asset protection.
An irrevocable life insurance trust, or ILIT for short, is a trust that owns a life insurance policy as its main asset. Because it is irrevocable, this type of trust cannot be revoked or changed once it has been created.
If you name a trust as the beneficiary of your life insurance policy, the death benefit from the policy will be paid to the trust, not directly to your beneficiaries. This can help protect the death benefit from creditors and can also help to avoid probate, which can be a time-consuming and expensive process.
Normally life insurance products pay to beneficiaries in a way that avoids probate so shouldnt be paid to the trust or owned by the trust unless your normal beneficiaries are not functional stable adults where the policy proceeds would need to be managed for them.
Helping ensure that children are well-cared for is a major reason people decide to purchase life insurance. Some parents also take the extra step of placing their life insurance policy in an irrevocable life insurance trust, or ILIT, typically to give their kids another layer of protection.
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A: Certain assets, such as IRAs, 401(k)s, life insurance policies, and Social Security benefits, to name a few, may not be suitable for inclusion in a trust. Tangible personal property with sentimental value (family heirlooms, jewelry, etc.) may also be better addressed in a will.

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