Life Insurance Planning in New York

Serving Clients in New York City and the New York Metropolitan Area

Irrevocable Life Insurance Trusts (ILIT)

Life insurance is a vehicle that many people use to preserve wealth and provide financial security for their families. 

Favorable tax treatment makes life insurance payouts exempt from income taxes; however, proceeds from insurance can be subject to estate tax. If the policyholder dies and the policy is in his or her name, the value of the death benefit will be included in the deceased person’s taxable estate. For this reason, many people choose to transfer their life insurance policies to Irrevocable Life Insurance Trusts (ILIT) while the cash value is low. This will successfully remove that asset from their estate to avoid the higher death value being taxed as part of the estate.

When properly drafted, an ILIT can remove life insurance policies from the estate, since the Trust, not the individual, becomes the owner of the policies. When the person for whom the policy is written dies, the Trust receives the benefit and disburses it according to the rules of the Trust, which was drafted according to the decedent’s instructions and wishes. The related estate tax is avoided while fulfilling the decedent’s final wishes.

Contact Grimaldi Yeung Law Group today for assistance.