Is is possible to get a life insurance policy out of an ILIT?
With the recent doubling of the estate tax exemption I’ve been asked, “Is it possible to get a life insurance policy out of an irrevocable trust (ILIT) when the terms of the trust no longer meet the needs of the grantor or the trust’s beneficiaries?” The answer is yes, but there are a number of legal and tax issues. Often, I’ve needed to remind individuals that irrevocable does not necessarily mean unchangeable or inflexible. It is possible to include language in an ILIT to deal with changes in the grantors’ and beneficiaries’ life circumstances. Unfortunately, these provisions are frequently omitted. So, what are the options for getting a policy out of, or to change the terms of, an irrevocable
trust when the trust no longer meets the needs of the client?
