St. Petersburg Irrevocable Life Insurance/Crummey Trust Attorney
You may have purchased a life insurance policy to provide financial protection to your spouse and children after you pass away. Life insurance proceeds are not subject to income tax, but they do become part of your estate. As such, they may be subject to estate taxes. Florida law does not impose an estate tax, but federal law does. However, an irrevocable life insurance trust can help ensure the proceeds are not taxed at the federal level. Below, our St. Petersburg irrevocable life insurance trusts attorney explains more about these important estate planning tools.
What is an Irrevocable Life Insurance Trust (ILIT)?
An irrevocable life insurance trust (ILIT) is designed to own and protect a life insurance policy. These trusts, like others, involve three people. The grantor of the trust is the person who has created it. The trustee is the person who will manage the assets within the trust. The beneficiaries include any person who will benefit from the property within the trust.
All trusts are either revocable or irrevocable. With a revocable trust, you can make changes to it or revoke it at any time as long as you are of sound mind. You cannot make these changes or revoke the trust with an irrevocable trust. All ILITs are irrevocable, as that is the only way to ensure they serve their most important purpose, which is estate tax management. The life insurance policy within the trust will no longer legally belong to you, just as if you had given it or sold it to someone else.
Benefits of Irrevocable Life Insurance Trusts
You may not immediately know why you should consider creating an irrevocable life insurance trust. After all, you can simply buy a policy and name beneficiaries within it. However, there are many benefits to creating an ILIT and they are as follows:
- Avoid estate taxes: If you continue to own the life insurance policy, it will become part of your estate. For many people this may not create an issue, but this could make larger estates susceptible to a number of taxes. By placing the policy into an ILIT, you no longer own it and so, it will not become part of your estate.
- Control the proceeds of the policy: You may not want your beneficiaries to receive the proceeds of the life insurance policy right away. This will happen if you simply purchase the policy and do not place it in a trust. An ILIT, on the other hand, can allow the proceeds to be distributed among your beneficiaries in a staggered manner.
Call Our Irrevocable Life Insurance Trusts Attorney in St. Petersburg Now
An irrevocable life insurance trust can be a useful estate planning tool, but they are not right for everyone. David Toback is a St. Petersburg irrevocable life insurance trusts attorney who can review the facts of your situation and advise on whether these types of trusts are right for you and outline your other options. Call us now at 813-252-7529 or contact us online to schedule a consultation.