Would Obtaining An Irrevocable Life Insurance Trust Be The Right Choice For Me, Following My Divorce?
An irrevocable life insurance trust (ILIT) is a smart choice for any individual that fears the heirs of his or her estate may be incapable, by virtue of age or otherwise, of handling the benefit responsibly. An ILIT allows you to maintain complete control of how and when your death benefits are disbursed even beyond death. When utilizing an ILIT, you authorize your death benefits to be paid directly to a trust, of which, you must assign an impartial third party to execute; thenceforward, called the trustee. Often times, the attorney that authors your trust documentation can also be utilized as the trustee of the estate. The trust operates as its own entity as the account is restricted to only the activities that are authorized by the trustee.
This requires that the trust be named the direct and sole beneficiary to your death benefits. Upon payment of your life insurance policy to the trust, the trustee is responsible for allocating the funds to your heirs. The allocation can either be made at the trustee’s discretion or as set forth by guidelines you establish when setting up the trust. Again, this allows you to maintain full control of the benefits. You may choose to designate age requirements, set up a disbursement schedule, or any other pre-qualifier you see fit, depending on the condition of your heirs. As a divorce can put a significant strain on relationships, an irrevocable life insurance trust is certainly an option to consider.