California

Life Insurance Trust

An Irrevocable Life Insurance Trust (“ILIT”) is a trust which owns life insurance policies. Generally, life insurance proceeds are included in your estate for federal estate tax purposes. Depending on the size of an estate, there may be federal estate taxes due upon death. If the ILIT is established and operated correctly, however, the insurance proceeds are not included in your estate for federal estate tax purposes.

As the name indicates, an ILIT is irrevocable and its terms cannot be amended after it is created. It must be funded and administered with close attention to specific requirements, so as not to trigger any federal gift or estate tax issues. Upon the death of the Grantor, the ILIT, which is the beneficiary of the policy(ies), will receive the death benefit. The insurance proceeds can be:

• used to increase the liquidity in the estate by purchasing estate assets for cash
• loaned to the estate to pay off liabilities or tax obligations
• held in trust for the beneficiaries
• distributed pursuant to the terms of the ILIT

As part of an advanced estate plan, the ILIT is a significant and powerful tool that can provide immense benefits to you and your loved ones by:

• providing for liquidity without requiring the sale of other assets
• increasing the size of the estate without increasing estate taxes
• allowing for transfers out of the estate with minimal or no gift tax consequences
• providing for ongoing management of assets under the terms of the trust

Vaksman Khalfin, PC will work in consultation with your other professional advisors, in order to ensure that all facets of your estate plan are established and operated correctly.