Options When the Policy is Ready but the Trust Is Not
Situation: With the pending reduction of the estate tax exemption in 2026 many people are thinking about their own estate plans, causing a surge in estate planning and the purchase of life insurance. As a result, we are receiving a renewed interest in one of the most common estate planning techniques – that of the irrevocable life insurance trust (ILIT). One of the most frequently asked questions is: “What options does an insurance professional have when s/he finds that a client is ready to apply for a policy, but the ILIT that will own the policy doesn’t exist? What if the policy is ready to be issued, but the trust is not ready? The Client(s) want the insurance issued and bound, but still desire to keep it out of the estate.”
Solution: There are a variety of potential options, but each has its own issues and problems.
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