Retirement guide
Trusts and life insurance
A trust holds assets for your beneficiaries under rules you set, which keeps them out of probate and can reduce estate taxes. An irrevocable life insurance trust (ILIT) owns a life insurance policy so the death benefit stays out of your taxable estate.
What it is
Without a trust, assets pass through probate, and a court process decides the timing. A trust lets your family, under the rules you wrote, control what happens next.
Most planning starts with one of two kinds. The difference comes down to control versus tax protection.
How it works
The two you'll hear about.
Revocable living trust
A flexible trust you control while you're alive. You can change, revoke or dissolve it at any time. Assets inside skip probate, so they pass privately and faster. Best for avoiding probate, privacy, incapacity planning and staying in control.
Irrevocable life insurance trust (ILIT)
A trust built to own life insurance. Once set up you generally can't change it, and that's the point: the death benefit leaves your taxable estate, so heirs keep more. Best for estate tax, creditor protection and estate liquidity.
Who it suits
What a trust does.
Asset protection
A properly structured trust can shield assets from creditors, lawsuits and divorce.
No probate
Trust assets bypass probate: less time, less cost, more privacy.
Control
Decide how and when beneficiaries receive money. Useful for minors and heirs with special needs.
Tax efficiency
The right trust reduces estate and gift taxes, so more reaches your heirs.
Trusts and life insurance
Where they work together.
Estate liquidity
Life insurance owned by an ILIT delivers cash for estate taxes, debts and settlement costs without forcing the sale of property or a business.
Wealth replacement
Give assets to charity and use trust-owned life insurance to replace that wealth for your heirs.
Equal shares
When one child inherits the business, trust-owned life insurance gives the others equal value.
Grandchildren
Trusts and life insurance together can move wealth to grandchildren while keeping control over how it's used.
We work with an advanced-markets firm on estate planning and coordinate directly with your estate planning attorney, so each trust is funded with the right policy.
Cost
What it costs.
The trust documents are drafted by an estate planning attorney, who sets their own fee. The life insurance inside the trust is priced like any policy: your age, health, the amount and the type of coverage.
Getting started is four steps: a consultation, a referral to an attorney (or work with yours), the insurance strategy that funds the trust, and ongoing coordination as your estate changes.
Coverage and pricing depend on underwriting, eligibility, state availability, and carrier approval.
At a glance
Revocable or irrevocable.
| Topic | Revocable living trust | Irrevocable (ILIT) |
|---|---|---|
| You can change it | Yes, at any time | Generally no |
| Avoids probate | Yes | Yes |
| Removes assets from your taxable estate | No | Yes |
| Creditor protection | Limited | Strong |
| Best for | Control and privacy | Estate tax and liquidity |
Questions and answers
What people ask us.
What is the difference between a revocable trust and an ILIT?
You can change a revocable trust at any time, and it avoids probate, but its assets stay in your taxable estate. An ILIT generally can't be changed, and in exchange the life insurance it owns is removed from your taxable estate.
Do you draft the trust?
No. An estate planning attorney drafts the documents. We refer you to one or work with the attorney you already have, and we put in place the life insurance that funds the trust.
Why fund a trust with life insurance?
It creates cash exactly when the estate needs it, for taxes, debts or equal shares among heirs, without selling property or a business.
Related guides
Read next.
Whole life insurance
Coverage that never expires, with a fixed premium and guaranteed cash value.
Read the guideWealth management
Permanent life insurance, annuities and trusts used to grow, protect and pass on what you've built.
Read the guideTax-advantaged strategies
Where insurance and annuities fit beside a 401(k) or IRA for growth the IRS lets you defer.
Read the guideStart your trust planning.
Thirty minutes on your family, your estate and which trust strategies fit.
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