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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Client Relations Manager
Jennifer A. McCabe
Client Relations Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
January/February 2022
Why Use an Irrevocable Life Insurance Trust?
All life insurance policy proceeds are paid income-tax free and can provide immediate cash to pay final expenses and income for survivors. So why would you consider an irrevocable life insurance trust (ILIT)?
Privacy and Protection
Policy proceeds avoid probate, which is a public proceeding and protects the benefit amount from your beneficiaries’ creditors.Reduce Estate Taxes
When you place a policy into the trust, you transfer ownership of that asset to the trust, effectively reducing the size of your estate and any estate tax you may owe.Setting Up the Trust
ILITs have complex rules so work with your estate planning attorney to create an irrevocable trust and help you to name a trustee. You’ll set the terms of the trust, specifying who will have control, how premiums will be paid, who will benefit and how payments will be distributed. Your decisions are final because retaining any control over the policy after it’s transferred to the trust will result in the policy being included in your taxable estate.The trust must be in existence for three years prior to your death to avoid estate taxes on the death benefit. You may be able to prevent this by having the trust purchase a new policy instead of transferring an existing one.
Paying the Premiums
You have options for paying the premiums on the life insurance policy you transfer to the trust. You can continue making the premium payments yourself or purchase a single premium policy so that no further payments will be due. Another option is to give money for premiums to someone else to make the payments. However, this could trigger gift taxes if the payments exceed the gift tax exemption amount.Consider Disadvantages
Before you decide to create a life insurance trust, consider the drawbacks. Once created, the trust is irrevocable. You can’t borrow from the policy. You also can’t change the beneficiaries, so if family dynamics or friendships change, the beneficiaries you named when you created the trust will still receive the policy proceeds.1052406-00001-00
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Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
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