RISK MANAGEMENT
LIFE INSURANCE
The Basics of an Irrevocable Life Insurance Trust
An Irrevocable Life Insurance Trust (ILIT) is a trust that owns and is the beneficiary of one or more life insurance policies. It is often used to control how a large sum of money is left to beneficiaries, or as an asset protection
vehicle against creditors. When the grantor dies, the proceeds from the insurance policy flow into the trust and are eventually distributed to its beneficiaries. Depending on the structure of the trust, the beneficiaries may be able to receive the money soon after the grantor’s death or the assets could be held for the lifetime of the trust beneficiaries.
BENEFITS OF AN ILIT A PREMIUM CAN PURCHASE A LARGE DEATH BENEFIT FOR A RELATIVELY HEALTHY INDIVIDUAL AN ILIT CAN PROVIDE LIQUIDITY TO AN ESTATE FOR THE PURPOSE OF PAYING ESTATE TAXES BECAUSE ILITS ARE NOT CONSIDERED TO BE OWNED BY BENEFICIARIES, THEY PROVIDE A LEVEL OF ASSET PROTECTION AGAINST LEGAL CLAIMS AND CREDITORS IT IS HARD FOR COURTS TO ATTACH THEM AS ASSETS OF THE BENEFICIARY, MAKING ILITS DIFFICULT FOR CREDITORS TO ACCESS LIFE INSURANCE PROCEEDS ARE GENERALLY NOT SUBJECT TO ESTATE INCOME OR CAPITAL GAINS TAXES FOR THE BENEFICIARIES THE GRANTOR MAY CONTROL HOW THE ASSETS ARE MANAGED AND DISTRIBUTED TO THE BENEFICIARY
HOWAN ILIT WORKS
GRANTOR MAKES GIFTS TO THE TRUST
Trust Payments Crummey Withdrawal Power
BENEFICIARY
TRUSTEE PURCHASES LIFE INSURANCE POLICY TO FUND THE IRREVOCABLE LIFE INSURANCE TRUST
Pays Premiums
INSURANCE COMPANY
Death Benefit
ESTATE MAKES LOANS OR BUYS ASSETS
AN IRREVOCABLE LIFE INSURANCE TRUST IS AN ESTATE-PLANNING TOOL USED TO PROVIDE LIQUIDITY FOR PAYING ESTATE TAXES AND PRESERVING THE VALUE OF ASSETS PASSING TO THE HEIRS.
Contact a Commerce Trust advisor to discuss your needs and learn how an irrevocable life insurance trust can help you achieve your gifting goals. 1-855-295-7821 | commercetrustcompany.com
Wealth | Investments | Planning Commerce Trust Company
Commerce Trust Company is a division of Commerce Bank. PC1350
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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