St. Petersburg Irrevocable Life Insurance Trust Attorney

An irrevocable life insurance trust is a sophisticated estate planning vehicle which affords many benefits. By placing a life insurance policy in an irrevocable trust, our clients can minimize estate taxes while retaining some control over how proceeds from the policy are paid out to beneficiaries. But as with all estate planning instruments, these trusts have possible drawbacks to consider as well. Call Fisher & Wilsey, P.A. to speak with a St. Petersburg irrevocable life insurance trust attorney. We can help you decide if this is the right trust for you, and create the necessary legal documents if you choose to move ahead.

A Closer Look at Irrevocable Life Insurance Trusts

Life insurance provides a ready pot of money for beneficiaries, in particular family members. Without the need to go through probate, life insurance proceeds are available quickly and can help with financial loss after your death. A key question, however, is how to hold the life insurance policy.

With an irrevocable life insurance trust, a grantor first creates and funds a trust, which then applies for a life insurance policy on the grantor. The trust pays the premiums each month on the policy. When the insured dies, the trust will distribute proceeds according to the trust document.

Anyone seeking to create this type of trust should work closely with an estate planning attorney to ensure they follow all legal requirements. It is easy to make a mistake, which could have negative legal consequences.

Benefits of this Type of Trust

One primary benefit is garnering tax advantages. Because the trust owns the life insurance policy, the death benefit is not counted in the grantor’s gross estate at death. Consequently, the estate is smaller than it otherwise would be, and taxes are minimized or sometimes eliminated.

Many grantors also like creating instructions for how proceeds should be disbursed. For example, they might fear a beneficiary will needlessly spend all the proceeds at once, so the trust allows only a certain amount to be disbursed each year.

Drawbacks of an Irrevocable Trust

To gain tax advantages, the trust must be irrevocable, which means the grantor cannot revise or modify it. With a living trust, by contrast, grantors move assets in and out and can even shut down the trust whenever they want. That is why living trusts are so popular with many people, who like retaining the option of changing their mind.

But once created, irrevocable trusts are extremely difficult to modify. The irrevocable nature of the trust is the primary reason why it offers tax advantages (which living trusts do not). A grantor is literally giving up ownership of the asset, so the IRS does not consider the asset part of the grantor’s estate.

Helping Clients Create the Right Estate Plans

Fisher & Wilsey, P.A. works with clients of all backgrounds to create individualized estate plans based on our clients’ objectives and values. Life insurance is an important component of many plans, and using an irrevocable trust might be just what you need to reduce taxation and increase the amount of wealth available for your family. To learn more about our services, please call today and schedule a time to speak with a St. Petersburg irrevocable life insurance trust attorney.