Chayet & Danzo, LLC Chayet & Danzo, LLC www.Coloradoelderlaw.com
Call for a Free Initial Consultation
Direct303-872-5980
Toll-Free 1-888-472-1088
Email Us
Compassion, talent and dedication: guiding colorado families and Their Trusted Advisors During Times of Need

Is a life insurance trust right for your Colorado family?

An irrevocable life insurance trust (ILIT) can both hold a life insurance policy and take the place of an outright distribution to beneficiaries. A major advantage of this type of trust is it allows you discretion to provide for special needs that might relate to the education of a child or hospital bills.

When should you create an ILIT and list it as the beneficiary of life insurance policies rather than a loved one?

There are four main reasons:

  • Your estate is large enough that you are concerned about federal estate taxes (above $5.43 million in 2015)
  • A beneficiary can’t manage his or her money well
  • You worry that creditors might take the inheritance
  • Your child has special needs

Each family has different dynamics and financial circumstances. You can often discuss if a trust is right for you during a broad estate planning conversation with an experienced attorney.

Basics of an ILIT

Life insurance trusts can be set up in different ways, but they are generally irrevocable. Because the ILIT will apply for coverage, pay the premiums and then receive the death benefit, the life insurance proceeds are excluded from the insured’s estate.

A life insurance trust can generally avoid a second tax at the death of a spouse by directing a trustee to hold the insurance proceeds for the insured’s spouse with any remainder passing to the children. You can also build flexibility into the trust so a trustee can use principal to provide for specific needs like the spouse’s health and support.

For small business owners an ILIT can also be an effective planning tool when used with a buy-sell agreement.

An ILIT does come with a cost and is not appropriate for everyone. If any of the above situations resonates with you, speak with an estate planning attorney to discuss whether an ILIT could be the right planning tool for you.

Source: Daily Finance.com, “How to Supercharge 4 Types of Trusts with Life Insurance,” Jeff Ross, May 7, 2015

 

No Comments

Leave a comment
Comment Information

Watch Our Firm Video

We are the premier Elder Law firm in the Colorado region. We set ourselves apart from other law firms in the area with our talent, dedication, compassion and ability of our attorneys to handle any case in Elder Law. We serve Colorado families with experience and dignity in your time of need.

View More Videos

Denver Office
650 S.Cherry St., Suite 710
Denver, CO 80246

Phone: 303-872-5980
Fax: 303-355-8501
Denver Law Office Map

Edwards Office
105 Edwards Village Blvd.
#D-201
Edwards, CO 81632

Toll Free: 888-472-1088
Fax: 303-355-8501
Edwards Law Office Map

Aspen Office
600 East Hopkins Avenue
Suite 301
Aspen, CO 81611

Toll Free: 888-472-1088
Fax: 303-355-8501
Aspen Law Office Map

  • Rated by Super Lawyers Macro Chayet SuperLawyers.com
  • Rated by Super Lawyers Frank J. Danzo, III  SuperLawyers.com
  • Member National Academy of Elder Law Attorneys, Inc. TM
  • Avvo Rating 10.0 Superb Top Attorney Elder Law
  • 2015 Five Star Professional Wealth Manager Multi-Year Winner
  • Our new 2015 Medicaid Book: how to protect your Family's Assets from devastating nursing home costs
  • Proud Sponsor 2015-Denver Colorado Senior Law Day
  • Peer Review Rated For Ethical standards & Legal Ability TM Martindale Hubbell
  • Haystack