What is an Irrevocable Life Insurance Trust?

An Irrevocable Life Insurance Trust (ILIT) is a trust created for the benefit of someone other than the Trustmaker that removes life insurance proceeds from the insured’s estate and provides a vehicle with which to direct the proceeds of the policy.  One significant benefit of an ILIT is that it passes the insurance proceeds estate tax-free to the beneficiaries.  There are rules regarding selection of the trustee and careful consideration should be given as to which policies should be transferred to or purchased by the trust.