Irrevocable Life Insurance Trusts (ILITs)
An Irrevocable Life Insurance Trust (ILIT) is a specialized estate planning tool that holds a life insurance policy outside of your taxable estate. When you die, the policy proceeds are paid to the ILIT — free of federal estate tax — and the trustee can use the funds to provide liquidity for your estate or distribute them to your beneficiaries according to the trust terms. Ahmad & Hussain Law Group establishes and documents ILITs for clients seeking to maximize the tax efficiency of their life insurance.
ILITs must be carefully structured and maintained to achieve their intended tax benefits. The trust must own the policy from inception (or the insured must survive for three years after transferring an existing policy), Crummey notices must be sent annually, and the grantor must avoid incidents of ownership over the policy. Our attorneys handle all of these requirements with precision.
- Policy ownership by the trust to exclude proceeds from the taxable estate
- Annual Crummey notice drafting and administration
- New policy acquisition through the ILIT
- Transfer of existing policies into the ILIT
- Trustee selection and instructions for proceeds distribution
- Coordination with overall estate plan and beneficiary designations
Our Irrevocable Life Insurance Trusts (ILITs) Services
An ILIT can be one of the most powerful tools for preserving wealth and providing liquidity at death. Our attorneys design and implement ILIT structures that meet all technical requirements while achieving your estate planning goals.
ILIT Drafting & Establishment
We draft a comprehensive ILIT agreement, designate trustees and beneficiaries, and establish the trust with all required provisions for tax and legal compliance.
Policy Acquisition & Transfer
Our attorneys coordinate the acquisition of new policies through the ILIT or the transfer of existing policies, ensuring three-year rule and technical requirements are addressed.
Ongoing Administration Guidance
We provide Crummey notice templates and ongoing administrative guidance to ensure the ILIT maintains its legal integrity and tax advantages year after year.
Frequently Asked Questions
If you own a life insurance policy at your death, the death benefit is included in your taxable estate — potentially triggering significant estate taxes. If an ILIT owns the policy, the proceeds are excluded from your estate, preserving more wealth for your beneficiaries.
A Crummey notice is a letter sent annually to ILIT beneficiaries informing them of their temporary right to withdraw premium gifts made to the trust. These notices are required to qualify the premium gifts for the annual gift tax exclusion. We provide templates and guidance for this annual requirement.
Yes, but you must survive for three years after the transfer for the proceeds to be excluded from your taxable estate. If you do not survive the three-year period, the proceeds will be included in your estate. We advise on this and other considerations before transferring an existing policy.
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