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Clear Lake Trusts Lawyer Explains Irrevocable Life Insurance Trust
If you are interested in learning more about setting up an irrevocable life insurance trust, read the following then contact your local Clear Lake trusts lawyer for a consultation. Many people hold life insurance policies on themselves. However, what many of these policy holders do not realize is that when they pass away part of that money will be considered to be part of their estate for estate tax reasons. The proceeds are able to be taxed by the IRS at the time of the policy holder’s death because the policy holder is able to change the beneficiary or withdraw the cash value of the policy at any time. The policy holder will have what is called “incidents of ownership” over the proceeds from it.
How Does an Irrevocable Life Insurance Trust Work?
If you are hoping to avoid estate taxes on your life insurance proceeds from your death, then it is recommended you contact your Clear Lake trusts lawyer to help set up an irrevocable life insurance trust for you. An Irrevocable Life Insurance Trust (ILIT) is set up to hold and take ownership of life insurance policies. A trustee will be put into place, and you will transfer your life insurance policy ownership to that person. You are able to name your spouse or children as the trustee, however you are not able to be named as your own trustee. Instead of naming a person, your primary beneficiary from your life insurance policy will now be listed as the ILIT. This means that upon your death, the ILIT will receive the proceeds from your life insurance policy. These funds can be held in a trust for your spouse during the rest of their life then transferred to your children upon their death. Establishing an ILIT is beneficial because your family will be able to use the funds to pay off your estate taxes, while not burdening them with more. When the insurance policy proceeds are in an ILIT, your spouse’s estate will not be taxed upon their death either.
Contact a Clear Lake Trusts Lawyer
For an experienced and professional consultation, contact your Clear Lake trusts lawyer today from the Law Firm of Badeaux & Associates at (281) 486-4737. The Law Firm of Badeaux & Associates have the Clear Lake trusts lawyer who will help you through the process of setting up an irrevocable life insurance trust for your loved ones.
Categories: Estate Planning
