There are lots of different trusts you may consider to set up as part of your estate. An irrevocable life insurance trust (ILIT) is created to avoid having an insurance policy payout included in the gross estate after you pass away.
Additionally, another protection offered by creating a trust is that you are able to safeguard your insurance policy from needing to be cashed out to pay off creditors. Under Michigan state law, the cash value of a life insurance policy is not protected from creditors while you are alive unless it is placed in an ILIT.
If you want to create an ILIT you will be considered the grantor of the trust while you are alive. You can have an existing life insurance policy transferred into the trust or you can pay the cash contributions to cover the premiums on a policy bought through the trust.
Just like with a regular life insurance policy, you will designate beneficiaries to receive the proceeds after you pass away. Once you create the ILIT it is irrevocable which means you are forfeiting your rights to the funds from the insurance. Because it is irrevocable this means you are not able to cash in the policy like you can with a traditional life insurance policy. Our Michigan estate planning attorneys at Grewal Law PLLC can answer all of your questions any type of trust.
Taxable Limits on Estates
If you know your gross estate will have a significant value it may be worthwhile for you to consider setting up an ILIT. By protecting the life insurance value through a trust it will prevent it from being counted in your estate. Often, this can save your heirs from paying the federal estate tax. Under federal law, the estate tax exemption in 2017 is $5,490,000. If you know your estate will go over the federal estate tax exemption contact our team at Grewal Law PLLC to get help setting up an ILIT.
However, it is important to note that any existing policies that are transferred into this type of trust will be counted in your gross estate for the first three years after the transfer takes place. If you pass away before the three-year time-frame passes the value of your insurance could impact whether or not your heirs pay the federal estate tax. Our team can help you understand how these rules may impact your trust and will go over options with you to provide additional safeguards.
Protection During Your Life
Another reason to set up an ILIT is to provide Asset Protection while you are alive. If you have any concern about having creditors go after the value of your life insurance it may be important to protect it. Anyone who is in a career where they may be faced with a malpractice or other civil lawsuit may consider protecting their life insurance through an ILIT. The trust will protect the insurance from being raided by creditors to pay off any debts.
Create an Irrevocable Life Insurance Trust Today
If you are considering the creation of an irrevocable life insurance trust contact Grewal Law PLLC today. We will review all of the options available to you and will help you weigh your choices to determine the best course of action for you.
Protect your life insurance for your heirs right away by creating an ILIT. The experienced Michigan estate planning attorneys at our firm will help you with setting up a trust and will go over all the types of agreements available. Our team can set up your irrevocable life insurance trust right away.
Contact us for a no obligation quote at (888) 211-5798.