Advantages of Putting Your Second-to-Die “Survivorship Life” Insurance Policy into an Irrevocable Life Insurance Trust (ILIT)

A policyowner may transfer a Survivorship Life (SL) policy to an irrevocable life insurance trust and this is often the solution for many estate planning problems. First, if the trustee of an irrevocable life insurance trust owns the SL policy, the estates of the insured spouses (assuming the spouses held no incidents of ownership within three years of death) will not include the death proceeds. The SL trust will pass the substantial death benefits to the heirs of the insured spouses outside of their estate tax base. Therefore, the SL trust will avoid compounding estate settlement costs facing the usual estate. A SL trust will also avoid the risks associated with using the children as individual third party owners. The assets of the SL trust generally will be protected from the creditors of both the insureds and the beneficiaries.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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