Boca Raton Trust Challenge Attorney

Helping Clients Mitigate Life Insurance Trust Issues

If you are considering establishing a life insurance trust or are in the midst of a dispute regarding an existing trust, you need an experienced Boca Raton trust challenge attorney on your side to help protect your rights. Ellis Law Group understands the intricacies involved in trust administration and litigation and will help you both understand the complexities of your trust and contest any disputes that may arise. Contact us today to learn more about our services and how we can assist you and your loved ones. 

What Is a Life Insurance Trust? 

Irrevocable life insurance trusts (ILIT) are entities established to hold title to an insured’s life insurance policy. Rather than naming a specific person as beneficiary, the trust is named as the primary beneficiary of the life insurance policy. Upon the insured’s death, proceeds from the life insurance policy are distributed to the trust itself. The trust instrument directs how, when, and to whom the proceeds will be distributed. The trustee manages the trust assets and distributes proceeds in accordance with the trust agreement.

People often purchase life insurance policies to provide financial protection to their spouse, children and other loved ones in case they die. These proceeds are generally not subject to income tax. However, they are subject to federal and state estate taxes. For example, if you have a $5,000,000 life insurance policy, your beneficiaries may only actually receive around $3,000,000 once estate taxes are paid. The main goal of an ILIT is to avoid life insurance proceeds from being diminished by federal and state estate tax.

How to Avoid Estate Taxes Related to Your Life Insurance Trust? 

In order to successfully avoid estate tax exposure, your life insurance trust must be irrevocable and the insured cannot be the trustee. New life insurance policies should be owned by the ILIT and all existing policies may be transferred to the ILIT. In the event an existing life insurance policy is transferred to an ILIT, it must be transferred into the trust at least three (3) years prior to the death of the insured. If the insured does not survive the three year period following the transfer, it is as if the trust never existed and the proceeds of the policy will be included in the decedent’s taxable estate.

What Are the Benefits of a Life Insurance Trust? 

Depending on your circumstances, the life insurance trust may continue for the benefit of your spouse, enabling the proceeds to pass to your children or other named beneficiaries after your spouse dies without being considered part of your spouse’s taxable estate as well.

The benefits of using an irrevocable life insurance trust include, but are not limited to:

  • Minimizing or eliminating federal and state estate taxes
  • Avoiding guardianship proceedings (if minor designated as beneficiary)
  • Appointing a trusted third-party trustee to manage the proceeds and see that the proceeds are distributed only for the reasons set forth in the trust agreement
  • Avoiding probate

Contact a Boca Raton Trust Challenge Attorney to Discuss Your Options

If you have questions or concerns regarding a life insurance trust, Ellis Law Group can offer you the experienced legal counsel you need. Schedule a consultation with a Boca Raton trust challenge attorney at our firm today by calling  561-910-7500 or contacting us online. We look forward to working with you.