ILIT`s Offer Exceptional Estate Tax Planning Benefits

Released on = April 12, 2007, 8:29 pm

Press Release Author = Philfortune Media, Inc.

Industry = Law

Press Release Summary = What is Irrevocable Life Insurance Trust or "ILIT"? What are
its benefits? Shawn Christopher, an attorney licensed in Nevada and California,
discusses Irrevocable Life Insurance Trust ("ILIT"), its benefits and things to
consider in implementing it in this article.

Press Release Body = By Shawn Christopher

An Irrevocable Life Insurance Trust ("ILIT") is a trust which owns life insurance
policies. Generally, life insurance proceeds are included on your estate for federal
estate tax purposes. Depending on the size of an estate, there may be federal estate
taxes due upon death. If the ILIT is established and operated correctly however, the
insurance proceeds from the policy (ies) are not included in your estate for federal
estate tax purposes.

As the name indicates, an ILIT is irrevocable and its terms cannot be amended after
it is created. The ILIT will need a trustee, which must be someone other that the
person creating the trust ("Grantor") or a person "close" the Grantor. The ILIT must
also have beneficiaries designated in the trust, which usually are the children of
the Grantor.

Once the ILIT is created it must obtain a tax identification number and open an
account to receive "gifts" from the Grantor. Typically, these gifts are annual
payments made to the ILIT that are equal to or less than the amount allowed for
annual gifts to any person, so as not to trigger any federal gift tax issues. The
"gifts" are then used by the trustee to pay the premiums due on the life insurance
policy(ies).

The "gifts" made by the Grantor must also meet other requirements in order to ensure
that the life insurance proceeds will not be subject to federal estate taxes. First,
once the gift is made, the trustee must give written notice to the beneficiary (or
guardian of a minor beneficiary) and give the beneficiary the right to take the gift
in lieu of making the premium payment. The beneficiary will typically have 30 days
to elect to withdraw the gift amount. It is important to explain to the beneficiary
that by withdrawing these funds, they may ultimately do more damage to their
inheritance. Also, if the beneficiary withdraws the monies, then the premium may not
be paid and may cancel the insurance policy. At the end of the 30 day period, the
trustee then uses the gifts to pay the insurance premiums.

Upon the death of the Grantor, the ILIT, which is the beneficiary on the
policy(ies), will receive the death benefit. The insurance proceeds can be:

used to increase the liquidity in the estate by purchasing estate assets for cash;
loaned to the estate to pay off liabilities or tax obligations;
held in trust for the beneficiaries; or
distributed pursuant to the terms of the ILIT.

In summary, the key benefits of ILIT are:

provide for liquidity without requiring the sale of other assets; increase the
size of the estate without increasing estate taxes; allow for transfers out of the
estate with minimal or no gift tax consequences; and can provide for ongoing
management of assets under the terms of the trust.

There are a couple of other points to consider when implementing an ILIT. First, the
ILIT is a taxable entity that must file its own separate tax returns each year.
However, the returns are generally simple and can be handled easily by an
accountant. Second, the transfer of an existing life insurance policy to an ILIT may
result in the policy proceeds being included in the taxable estate if the death of
the policyholder occurs within three (3) years of the transfer. The recommended
approach is to have the ILIT acquire a new policy and then the three year
restriction would not apply.

Shawn Christopher's office is located in the Las Vegas area. For more information,
please review his website, http://www.shawnchristopherltd.com

For more information about life insurance trusts, see
http://www.shawnchristopherltd.com/ilit.htm



Web Site = http://www.philfortune.com

Contact Details = Philfortune Media, Inc.
18 Gulf Pines,
Las Vegas NV 89148
Tel: 702.949.0925
Fax: 702.948.0494
Toll Free: 877.627.2497
www.philfortune.com
email: info@philfortune.com
forum: http://forum.philfortune.com

  • Printer Friendly Format
  • Back to previous page...
  • Back to home page...
  • Submit your press releases...
  •