Life Insurance Trusts

"Unless commitment is made, there are only hopes, but no plans."

- P. F. Drucker

Irrevocable Life Insurance Trust

While working on estate planning, you may want to consider creating an irrevocable life insurance trust. There are many different reasons why this may be a good fit for your assets and your family. One important hallmark about this kind of trust planning is the “irrevocable” aspect; this trust cannot be changed in any way after its creation.

Irrevocable Life Insurance Trust Planning

In short, an irrevocable life insurance trust is a legal document that transfers personal ownership of a life insurance policy into the trust's name. The trust, not the trust’s creator, now becomes the sole, legal owner of the policy and its proceeds.

Establishing a life insurance trust that meets complex legal and tax guidelines is not a do-it-yourself matter. Life insurance itself is very common, and you may be working from the point of already having it. However, very careful trust planning needs to go into the next steps, or you could find yourself with more problems than solutions.

Just because an irrevocable life insurance trust holds your life insurance policy and separates it from the assets contained within your estate doesn’t mean you can’t maintain control over the estate planning aspects. You still get to dictate beneficiaries, detail the circumstances under which they will receive payments, and name trustees.

Don’t risk setting up an irrevocable life insurance trust that has dangerous framing and causes issues for you and your loved ones down the line. All of the positive aspects of this legal device are attainable, but you need an experienced advocate to help guide you through the pitfalls of the estate planning process.

Benefits of an Irrevocable Life Insurance Trust

Now, let’s get to some of the benefits of an irrevocable life insurance trust that our attorneys can help you attain:

  • Insurance proceeds are not included in the taxable estate after your death. This means that with an irrevocable life insurance trust, there won’t be the danger of a large insurance payout pushing your estate value over the federal tax threshold at great cost to your beneficiaries.
  • An irrevocable life insurance trust can help protect your assets from creditors and protect your insurance benefits for your beneficiaries.
  • If you have beneficiaries, such as minors, who are not mature or competent enough to handle ownership of the life insurance policy, an irrevocable life insurance trust is a great idea. It can help you avoid the potential risks inherent in giving a policy directly to a beneficiary who isn’t trustworthy.
  • During trust planning, you can carefully structure the trust so that you get to dictate exactly who receives funds, who controls funds, and when funds are distributed.

Make an appointment for your complimentary consultation today at Perkins & Zayed so that we can get to work on creating an irrevocable life insurance trust for you and for the benefit of your loved ones.

Requirements of an Irrevocable Life Insurance Trust

There are strict conditions if you want to take advantage of the estate tax savings. This is why it is important to have a legal professional by your side during trust and estate planning. Requirements that ensure proceeds are kept out of your estate include:

  • The trust must be irrevocable - it absolutely cannot be revoked or amended at any time. You cannot avoid this rule, so the trust must be carefully and correctly structured before it goes into effect.

  • Unlike with other types of trusts, the trust creator cannot be the trustee of an irrevocable life insurance trust - even appointing your spouse should be done with restrictions in place.

  • The trust must be created at least 3 years before your death - any time before this period, the proceeds still become part of your estate. It’s therefore wise to start trust planning now.

If you would like to set up an irrevocable life insurance trust, or figure out whether one is right for your estate planning needs, we can help. Contact us to learn how to best handle this area of estate planning. Schedule your first and complimentary consult by calling 630-665-2300 or emailing us at