Switch to ADA Accessible Theme
Close Menu
Spokane Estate Planning, Elder Law & Probate Lawyer
Three Washington Locations To Serve You Spokane Valley Kennewick Yakima
Spokane Estate & Probate Lawyers / Blog / Trust / 5 Things to Know About Irrevocable Life Insurance Trusts

5 Things to Know About Irrevocable Life Insurance Trusts


Many Spokane Valley residents purchase life insurance policies to provide their family with some measure of financial security. With the typical life insurance policy, you pay monthly premiums and upon your death, the insurance company pays a defined death benefit to the beneficiary or beneficiaries you named during your lifetime. Usually, the beneficiary is a family member or other individual heir.

But you can also create a special kind of trust to serve as a beneficiary. This is known as an irrevocable life insurance trust or ILIT. Not everyone needs or would benefit from an ILIT. But there are a number of reasons you might wish to consider creating one.

Here are a few things to understand about ILITs:

  1. Irrevocable Means Irrevocable

Most estate planning trusts are revocable, meaning you can amend, alter, or abolish them at any point during your lifetime. Effectively, you still retain personal control over the assets even while they are in the trust. But an ILIT is, as the name suggests, irrevocable. So, once you create and fund an ILIT, you no longer have control over those assets. Indeed, unlike a revocable trust, with an ILIT you cannot serve as your own trustee.

  1. The ILIT Is the Beneficiary

In the typical ILIT, the grantor–the person creating the trust–provides cash or other assets to the trustee. The trustee uses those funds to pay the premiums on the life insurance policy. The ILIT itself is the beneficiary. But the trust will contain further instructions from the grantor on how to distribute the proceeds once it is received by the trustee. Indeed, an ILIT may give the trustee substantial discretion in determining when and how to make distributions to beneficiaries.

  1. An ILIT Is Not Subject to Probate

As with most estate planning trusts, a life insurance policy held by an ILIT is generally not considered part of the grantor’s probate estate. This enables the trustee to distribute the life insurance policy proceeds without having to go through the formal Washington probate process.

  1. An ILIT Can Help Minimize Gift & Estate Taxes

A life insurance policy held by a properly established ILIT is also usually not included in a person’s gross estate for the purposes of calculating federal gift or estate tax liability. (There is an exception for existing policies transferred to an ILIT less than 3 years before the grantor’s death.) Life insurance polies that are owned by the decedent, not in an ILIT, and pay out at death do become part of the estate and would be subject to estate tax. And although most Washington probate estates will not have to deal with gift or estate taxes, if such taxes are due an ILIT can help provide immediate cash to pay off that debt, all without increasing the underlying estate tax obligation.

Contact Moulton Law Offices Today

As with any trust, an ILIT is not something you should enter into without due consideration. Our experienced Spokane trust lawyers are happy to sit down and review your options with you. Contact Moulton Law Offices, P.S., today to schedule a consultation. We serve clients throughout Spokane, Kennewick, and Yakima.

Facebook Twitter LinkedIn