A life insurance trust (LIT) is an estate planning and wealth management tool specifically designed to reduce estate tax and preserve proceeds that get passed onto heirs. The policies are drawn up by lawyers as irrevocable trusts. Life insurance trust lawyers in California operating in this specialized estate planning area often suggest life insurance trusts along with other wealth-preserving mechanisms.
What does Irrevocable Trust mean?
The terms of an Irrevocable life insurance trust cannot be changed during the insured’s lifetime. As a wealth preservation tool, its insurance value is protected from estate taxes. Proceeds become immediately liquid and available to beneficiaries. A life insurance trust attorney often suggests a LIT as part of an overall wealth management plan. LITs, however, are not technically considered part of a formal estate plan.
The Role of Life Insurance Trust Lawyers
If you have experience with trusts, you know how complicated it is to decide which one is right for you. It is no different with life insurance trusts. Unless your LIT is properly drawn up according to California law, your family could be hassled by your insurance company when it comes time for a payout. Your trust lawyer will defend your document and make getting paid easier.
The Same as Life Insurance? No
Despite their benefits, life insurance policies present problems of their own when the insurer passes away. As with real estate and other personal property, the benefits from a life insurance policy are subject to government taxation. The tax burden can be significant on large policies; managing and distributing its proceeds can become overwhelming and confusing for your heirs.
A life insurance trust attorney streamlines the process and eliminates what can go wrong later.
- Draws up trust documents
- Transfers current life insurance policies into the trust
- Helps purchase policies and legally transfer them to the LIT
- Helps to legally dissolve the trust if you change your mind about terms or beneficiaries. (Don’t forget, the LIT is irrevocable).
- Manages the trust and distribution of funds to beneficiaries
- Defends the trust document should legal challenges arise
- Clarifies and defends the terms of the policy for family members and beneficiaries
What LIT Lawyers Say
The tax advantages are a significant part of a LIT. An Irrevocable life insurance trust can reduce your taxable income considerably. Aside from the tax savings LITs provide, a properly created trust by a life insurance trust lawyer offers several other benefits that make them an ideal planning tool.
- Protection from creditors going after the cash in the policy
- Gives the insured a say as to when and how proceeds will be distributed
- Sets specific orders for distribution that hold up in court
Let’s Talk Trusts
With more than 30 years of planning family wealth preservation, The Law Offices of Michael K. Lanning, APLC, have drawn up a considerable number of LITs and value them as an important tool in estate planning. They are especially useful for families of special needs members in assuring they continue receiving payouts after your death. Establishing an Irrevocable life insurance trust is a wise estate planning strategy. Contact us at 310-820-1600 or go to our website to learn more and set up a consultation.
We serve West Los Angeles, Santa Monica, Pacific Palisades, Manhattan Beach, and the surrounding Los Angeles communities.
The Law Offices of Michael K. Lanning, APLC
11777 San Vicente Blvd.
Los Angeles, California, 90049