Los Angeles Life Insurance Trust Attorney
What is a Life Insurance Trust?
Life insurance trusts are trusts that are created to acquire and hold a life insurance policy. Although many people create their life insurance trusts to be
revocable for good reasons, many are
irrevocable. These irrevocable life insurance trusts or ILITs are created for a myriad of tax and non-tax reasons and can be a very effective method of transferring wealth out of the settlor's estate.
When an irrevocable life insurance trusts is properly created and administered, the trust can hold life insurance on the insured's life and the proceeds of the life insurance can be excluded from the settlor's estate. Due to the stringent requirements in setting up an ILIT, it is important that you use an experienced attorney to advise you on the benefits and drawbacks of using one. Also, it is essential that you have an attorney draft the Irrevocable Life Insurance Trust.
Why a Life Insurance Trust Must be Irrevocable
Although a life insurance trust need not be irrevocable, it must be irrevocable to obtain certain benefits. Life insurance trusts are created for a number of reasons. One of the reasons why people obtain life insurance is to provide cash for the estate. Often estates have many assets such as real estate or small businesses that are not easily liquidated, however, there is a saying "Cash is King." Due to the liquidity concerns of many small business owners, life insurance trusts are a very important aspect of many business owners estate plans. When an estate has many hard assets, the life insurance trusts may be helpful in obtaining the necessary cash to settle claims and make necessary distributions.
Benefit of Hiring a Los Angeles Trust Lawyer
Irrevocable life insurance trusts are created in a way that does not allow the insured to maintain control over the asset. Although irrevocable life insurance trusts may provide certain tax savings, it is important that you understand the advantages and disadvantages of setting one up. For many, the irrevocable life insurance trust can be an effective tool in putting together a comprehensive estate plan. However, you should also discuss the drawbacks with your attorney to understand whether it is right for you. Only after discussing the advantages and disadvantages with your lawyer can you make an informed decision.
Should you get an irrevocable life insurance trusts or other life insurance trust? If you are thinking about obtaining life insurance and want to find out more information about life insurance trusts, please contact a Los Angeles trust attorney at our firm.