San Jose Irrevocable Life Insurance Trust Attorneys

San Jose Irrevocable Life Insurance Trust Attorneys

Life Insurance Trusts (ILIT)

Planning for the future is a huge undertaking. No plan is more crucial than establishing how to take care of loved ones and other valued relationships in the event of death or incapacitation. If you desire to preserve property and settle inheritance for your beneficiaries via an irrevocable life insurance trust, or ILIT, the attorneys at Huber Fox, P.C. can help you achieve your estate planning goals.

Providing Guidance for the Future

Our attorneys specialize in trust and estate law, proudly representing clients throughout Northern California. We dedicate our energy to providing estate planning guidance supported by years of experience to serve the best interest of our clients. If you need help with a legal issue related to estate planning Huber Fox, P.C. has expert attorneys available to assist you with probate and trust administration.

What Is an Irrevocable Life Insurance Trust?

An irrevocable life insurance trust, or ILIT, is a trust created by a grantor that’s funded with one or multiple life insurance policies while they are alive. The trust is irrevocable, meaning that it cannot be changed or revoked once the terms of the trust have been finalized. Under general circumstances, the trust is set in stone, and once established, it offers significant benefits.

The act of moving a life insurance policy into an irrevocable trust provides grantors advantages that include the following:

• The grantor can avoid subjecting the death benefit in their policy to federal estate taxes.
• The grantor can create a directive for how the death benefit is used and who the trustee will be for its distribution.
• The funds in the trust can also cover the cost of estate taxes and other settlement expenses, preventing businesses or other high-valued assets from being sold to cover those costs.
• The grantor can leverage the maximum allowed gift tax exclusion to each listed beneficiary and use those gifts to pay the life insurance premiums.

Establishing an ILIT is an advanced estate planning measure that provides protection that extends beyond tax benefits. An ILIT also protects your life insurance benefits from divorce proceedings and legal action against you (or your beneficiaries) from creditors. An ILIT helps prevent your estate from probate and prevents asset and privacy loss during the probate process.

If you have a minor or an adult child with a disability or special needs, an ILIT can protect the child’s inheritance and allow you to set the terms of how the funds should be used for their future care and expenses. If you wish to protect funds for a child or another dependent who lacks financial savvy or who is not yet prepared to manage large sums of money, an ILIT can help protect the funds from being misapplied. In terms of legacy planning, an ILIT is an especially powerful tool for creating a safety net for loved ones after death.

Who Should Be the Owner of an Irrevocable Life Insurance Trust?

Many situations can cause someone to use an irrevocable life insurance trust to protect their assets and secure inheritance for beneficiaries. If you have one or more of the following needs, an irrevocable life insurance trust may be right for your estate plan, especially in the following instances:

• You want the tax benefits associated with legacy planning.
• You want to minimize estate tax expenses.
• You want to avoid hefty gift taxes.
• You want to protect beneficiaries who receive government benefits (Medicaid, or Social Security income for a disability).
• Protect valued assets from creditors.
• You want to grant your trustee the discretionary power to distribute trust funds to beneficiaries according to specific needs or milestones (such as marriage, college graduation, or purchasing a home).
• You want to eliminate tax issues by having a life insurance policy that is owned in an irrevocable life insurance trust.

What Happens to the Funds of Irrevocable Life Insurance Trusts When a Grantor Dies?

The grantor sets the terms of the trust when the trust is created. Upon their death, the trust continues to collect benefits to be distributed to beneficiaries via the grantor’s pre-determined directives by the trustee of their estate.

Can Someone Remove a Life Insurance Policy From an Irrevocable Trust?

Once an ILIT has been finalized by the grantor, he or she cannot revoke or otherwise amend the policy within the trust during his or her lifetime. The policy will be distributed according to the grantor’s terms only after they die and the trust goes into effect.

Can Someone Sue an Irrevocable Trust in California?

A trust is created as a legal entity and cannot be sued directly in California. However, the trustee of an irrevocable trust can face litigation under certain circumstances. If there is any wrongdoing on the part of the trustee, the trustee can be held liable for mishandled funds. Dishonest conduct that negatively impacts the beneficiaries can spell legal trouble for trustees who go against the final wishes of grantors.

When it comes to the distribution of funds and other assets in a trust, trustees are expected to perform their fiduciary duties with a high level of integrity. If, for any reason, the beneficiaries believe the trustees are failing to act in their best interest, they can file a claim against the trustee that will then go to probate court for settlement.