What is an Irrevocable Life Insurance Trust?

February 19, 2018

Irr Life Insurance Trust

Many people aren't aware that the IRS can include proceeds from their life insurance policies in their estates for tax purposes when they die. One way to avoid your life insurance proceeds being taxed is to create an irrevocable life insurance trust (ILIT) to take ownership of the policy. You can transfer ownership of an existing policy to the ILIT after it's been formed, or the trust can purchase the policy directly. You cannot however serve as the trustee of the ILIT because that would give you control and the IRS might view this as you retaining "incidents of ownership" over the policy which make it subject to taxation. A properly drafted and funded ILIT can help you keep the death benefits of your life insurance policies out of your estate and avoid federal estate taxes on the proceeds.

Call (443) 470-3599 today and schedule a consultation with one of our experienced Maryland Estate Planing Attorneys to learn more about Estate or Elder Law and how we can help you.

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