Irrevocable Life Insurance Trusts (ILITs)
An ILIT removes your life insurance policy from your taxable estate, potentially saving your heirs millions in estate taxes. The trust owns the policy, pays the premiums, and distributes the death benefit according to your instructions.
To be effective, the ILIT must be set up properly — you cannot be the trustee, and you must survive at least three years after transferring an existing policy into the trust.
Estate Equalization
Life insurance can equalize inheritances among heirs when assets aren't easily divisible. For example, if you want to leave a family business to one child and provide equal value to another, a life insurance policy can provide the cash to the non-business heir.
This avoids forcing the sale of the business or creating resentment among siblings who receive unequal assets.
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Survivorship (second-to-die) life insurance covers two lives and pays out only after both insureds have died. It's commonly used by married couples to pay estate taxes or fund trusts for the next generation.
Premiums for survivorship policies are lower than individual policies because the insurance company doesn't pay until both lives have ended. This makes them an efficient tool for transferring wealth across generations.