The principal goal of an Irrevocable Life Insurance Trust (ILIT) is to remove the life insurance proceeds from the insured’s gross estate for federal estate tax purposes. For a Grantor to successfully remove transferred property (such as an existing life insurance policy or cash to fund an ILIT.
- Complete Gift Make a completed gift of the property transferred to the ILIT under Treasury Reg. §§25.2511-2(b) and (c)
- Survive Survive for three (3) years after making the transfer of the property if the transferred property would otherwise be included in the grantor’s gross estate under IRC section §2036.
- No Beneficial Interest Don’t retain a beneficial interest in the transferred property or in the ILIT. IRC §2036
- No Power to Alter, Amend, Revoke Don’t retain the power to alter, amend, revoke, or control the beneficial enjoyment of the transferred property, or the power to alter, amend, or revoke the ILIT.
- Incidence of Ownership Don’t retain any incidents of ownership in any of the life insurance policies transferred to the ILIT
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