An Irrevocable Life Insurance Trust (ILIT) can be a highly effective tool.

Life insurance is the primary source for funding an ILIT. The trust owns, pays for the policy, and is also the beneficiary. At death, the proceeds are paid directly to the trust. The trustee will then distribute the funds according to the grantor's directions.

Life insurance held in an ILIT can provide your estate with several benefits, including liquidity to pay:

• Estate taxes
• Funeral costs
• Survivor Needs
• Administrative Expenses

This is accomplished by the trust buying assets from your estate. If an ILIT is properly structured, the life insurance owned by the ILIT will be outside of your taxable estate. An often overlooked advantage is that the assets in the trust can be made creditor-proof (from creditors of the grantor and the beneficiaries) with proper drafting of the ILIT.

Although the trust is irrevocable, you can build flexible provisions into the trust to accommodate changing circumstances.