Life insurance is one of the most effective ways to enjoy unique features that one may not find associated with other financial products.
For instance, life insurance policyholders can make the most out of the leverage that entails a policy where all the policyholder has to do is pay small premiums in a bid to secure a large death benefit that their loved ones can be liquidated in the event of the policyholder’s death.
One of the most popular life insurance policy variants is setting up an ILIT or Irrevocable Life Insurance Trust. An ILIT is primarily set up to control and own multiple or a single permanent life insurance policy when the policyholder is still alive.
Setting up an Irrevocable Life Insurance Trust entails many benefits. Some of the most appealing advantages of ILITs are enunciated in the sections below –
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It Is One Of The Best Ways To Protect Assets
Every nation has different rules in place that dictates how much value of an insurance policy or the death benefit of a policy is kept from the reach of creditors. Setting up an ILIT can help one to protect assets tied with the trust from creditors who at some point have lent money to the grantor of the trust.
Trustees Of ILITs Have Full Authority To Make Distributions
Trustee(s) of ILITs enjoy the discretionary power assigned to them. This allows ILIT trustees to control when beneficiaries of the trust receive their payouts. Trustees can also make distributions at their discretion. Trustees can also control how beneficiaries receive payouts from the trust. Furthermore, the trustee(s) of an Irrevocable Life Insurance Trust also holds the power of allotting payouts when beneficiaries complete certain objectives/milestones.
For instance, a trustee of an ILIT can allot payouts to the beneficiary of the trust when they are expecting a child or they have completed their graduation.
The discretionary powers assigned to trustees of an ILIT ensure that everyone who is nominated as a beneficiary of the trust is financially protected.
ILITs Can Assist One With Their Legacy Planning
Setting up Irrevocable Life Insurance Trusts can help one with their legacy planning especially when they want to gift estates or transfer payouts to beneficiaries of the trust that are at least a generation younger than the donor.
For example, if a grantor wants to gift estates or payouts to their grandchildren instead of their children then the payout or the estate will not be subjected to taxes.
In simple words, the proceeds of the death benefits are counted out of the grantor’s estate. Hence, generations of the grantor’s family which includes their grandchildren as well as great-grandchildren can benefit from the payouts without worrying about paying the authorities taxes in the form of Generation-Skipping Transfer taxes as well as estate taxes.
Conclusion
To sum it all up, ILITs are powerful tools that help one to manage their wealth so that their family members can get maximum benefits. However, all these benefits can only be enjoyed when one makes informed decisions. To learn more, one should consult with renowned financial advisors.
