Overview

There are many significant advantages to having your life insurance held by an irrevocable life insurance trust. Foremost for many people is the avoidance of estate taxes. Many people are under the mistaken impression that life insurance is not subject to estate taxes. This is incorrect. Life insurance is included in the estate of the owner of the policy regardless of who the beneficiaries of the policy are. However, if the policy is owned and held by an irrevocable trust it is able to totally avoid estate taxes. In addition an irrevocable life insurance trust provides greater flexibility in handling distributions of the proceeds than would be possible under insurance policy settlement options. Multiple beneficiaries may be flexibly treated under "sprinkling" powers conferred on the trustee.