https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AIrrevocable_life_insurance_trust_%28ILIT%29 2026-05-02T12:46:33Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Irrevocable_life_insurance_trust_(ILIT)&diff=9281&oldid=prev 2026-03-11T05:11:53Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>🏛️ &#039;&#039;&#039;Irrevocable life insurance trust (ILIT)&#039;&#039;&#039; is an estate-planning vehicle specifically designed to hold a [[Definition:Life insurance | life insurance]] [[Definition:Insurance policy | policy]] outside of the insured&#039;s taxable estate, ensuring that the [[Definition:Death benefit | death benefit]] passes to [[Definition:Beneficiary | beneficiaries]] free from federal estate taxes. Unlike a revocable trust, an ILIT cannot be modified, amended, or terminated by the grantor once it is established — a restriction that is central to its tax advantages. In the insurance industry, ILITs represent a significant distribution channel for high-face-value [[Definition:Whole life insurance | whole life]] and [[Definition:Universal life insurance | universal life]] policies, making them a focal point for carriers, [[Definition:Insurance agent | agents]], and [[Definition:Financial advisor | financial advisors]] who serve affluent clients.<br /> <br /> 📋 The grantor creates the trust, names a [[Definition:Trustee | trustee]], and transfers either an existing policy or the funds needed for the trustee to purchase a new one. Once the trust owns the policy, the grantor makes annual gifts to the ILIT — typically structured to qualify for the gift tax annual exclusion through so-called Crummey notices that give beneficiaries a temporary right to withdraw contributions. The trustee uses these contributions to pay [[Definition:Premium | premiums]]. When the insured dies, the trustee receives the death benefit and distributes proceeds according to the trust terms, bypassing both [[Definition:Probate | probate]] and estate taxation. For insurers, this structure often involves coordination with [[Definition:Underwriting | underwriting]] departments to verify insurable interest and confirm that the trust is the proper applicant and owner of the policy.<br /> <br /> 💡 Beyond tax efficiency, the ILIT matters to the insurance ecosystem because it concentrates high-value policy sales in a sophisticated planning niche that demands specialized knowledge from producers and carriers alike. Policies placed inside ILITs tend to carry substantial [[Definition:Face amount | face amounts]] and generate meaningful [[Definition:Commission | commission]] revenue, but they also require ongoing administrative diligence — missed Crummey notices or lapsed premium payments can unravel the intended tax benefits. Carriers that support this market invest in advanced case design units and [[Definition:Illustration software | illustration software]] tailored to trust-owned scenarios, while [[Definition:Insurtech | insurtech]] platforms are beginning to digitize trust administration workflows to reduce the operational friction that has historically accompanied these arrangements.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Life insurance]]<br /> * [[Definition:Estate planning]]<br /> * [[Definition:Death benefit]]<br /> * [[Definition:Whole life insurance]]<br /> * [[Definition:Universal life insurance]]<br /> * [[Definition:Insurable interest]]<br /> {{Div col end}}</div>

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