What is an irrevocable life insurance trust (ILIT) and how does it work?
Answered by 4 licensed agents
Answered by Taylor Langlois on July 16, 2026
Agent Licensed in KS
Here’s how it works:
• An attorney creates the ILIT, and once it’s established, it generally cannot be changed or revoked.
• The trust purchases a new life insurance policy (or, in some cases, an existing policy is transferred into the trust, although the IRS three-year rule may apply).
• The grantor makes gifts to the trust to pay the insurance premiums.
• Upon the insured’s death, the insurance proceeds are paid directly to the trust.
• The trustee distributes the funds according to the instructions in the trust document, helping provide liquidity for heirs, protect assets, and potentially avoid probate.
An ILIT can be a valuable planning tool for business owners, individuals with larger estates, blended families, or anyone looking to control how life insurance proceeds are distributed. However, because trust and tax laws are complex, it’s important to work with an experienced estate planning attorney, tax professional, and financial advisor to determine whether an ILIT is appropriate for your situation.
If you’d like to discuss how life insurance fits into your estate or retirement plan, I’m happy to help.
Don Lilly III, MBA, LUTCF, LACP
Financial Advisor & Insurance Professional
Answered by Don Lilly III on July 16, 2026
Broker Licensed in VA, CT, FL & 8 other states
Answered by Tim Cassidy on July 7, 2026
Broker Licensed in TX, AL, AR & 35 other states
Answered by Andre Cabral on July 9, 2026
Agent Licensed in NJ
Tags: Financial Planning
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