An ILIT is an irrevocable trust that enables a grantor to transfer insurance policy proceeds to family members without having the proceeds included in his or her estate. By working closely with an attorney and a financial adviser, an individual may transfer an existing life insurance policy into an ILIT, or purchase a life insurance policy on the grantor’s life through an ILIT, resulting in the ILIT owning the policy. The ILIT is named as the beneficiary of the policy so that the policy proceeds are excluded from the grantor’s estate. Upon the death of the grantor, the terms of the ILIT can instruct the Trustee to continue to manage the proceeds for the beneficiaries, distribute the proceeds outright to beneficiaries, or distribute the proceeds to separate trusts established for the beneficiaries.
