One of the most common types of irrevocable trusts is the irrevocable life insurance trust. How can it help you? Well, under the laws of many states, creditors can access the cash value of life insurance. And even if state law protects the cash value from creditors, at death, the proceeds of life insurance owned by you are included in your gross estate for estate tax purposes.
You can avoid both of these adverse results by having an irrevocable life insurance trust own the insurance policy and also be its beneficiary. In addition to providing asset protection for the insurance or other assets held in trust, irrevocable life insurance trusts can eliminate estate tax and protect beneficiaries in the event of divorce.
The provisions of this trust typically mirror the provisions of the trust maker’s revocable living trust or will. And while this trust is irrevocable, as with any irrevocable trust, the trust terms can grant an independent trust protector the flexibility to modify the terms of the trust to account for unanticipated future developments.
Irrevocable life insurance trusts can be individual trusts (which typically own an individual policy on the trust maker’s life) or they can be joint trusts created by a husband and wife (which typically own a survivorship policy on both lives).
You can protect your assets from creditors by placing them in a well-drafted trust. By working together with your other wealth planning professionals, we can ensure that your planning meets your unique goals and objectives.