An irrevocable life insurance trust is a powerful estate planning tool. It also offers several advantages for individuals and families in Virginia.
Understanding the key benefits of an ILIT is helpful for making informed decisions about estate planning strategies.
1. Asset protection
A notable benefit of an ILIT is asset protection. Assets held within the trust are untouchable by creditors, lawsuits and other potential threats. This safeguard ensures that the life insurance proceeds make their way to the intended beneficiaries and are inaccessible to outside parties. By placing life insurance policies in an ILIT, people can safeguard their wealth and provide a secure financial legacy for their loved ones.
2. Control over distribution
Another advantage of an ILIT is the ability to maintain control over the distribution of life insurance proceeds. The trust document specifies how and when the funds undergo distribution, allowing people to customize their estate plan according to their wishes. This control ensures that the assets undergo distribution in a manner that aligns with the individual’s values and goals. This can enhance peace of mind and clarity for both the grantor and beneficiaries.
3. Probate avoidance
Establishing an ILIT can also help people avoid the probate process. Probate can be time-consuming, costly and public. Because the trust owns the life insurance policy, rather than the individual, it does not pass through probate upon the individual’s death. Instead, the proceeds go directly to the trust beneficiaries according to the terms outlined in the trust document. This streamlined process allows for a smoother transfer of assets. It also minimizes the administrative burden on heirs.
When funding an ILIT, people can use one or multiple life insurance policies. This flexibility allows people to tailor the trust to their specific needs and objectives, maximizing its effectiveness.
