IRC 2042 Reg. 20.2042-1


  • Does the client need an ILIT?
  • Who owns the policy?
  • Who can be the trustee?
  • What powers can the trustee(s) have?
  • Who can be a beneficiary?
  • Tax issues
    • GST Tax

When Client Needs ILIT

Is the estate tax an important consideration for the client? If no, then an ILIT does not make sense.

ILIT Must be Irrevocable

ILIT Must Own Policy

See Transfer to Trustee

Insured Should Not Be a Trustee

Insured Must Not Be Beneficiary

How ILIT Can Avoid Estate Tax

There is not income tax on the death benefit of a life insurance policy. But there might be an estate tax. So, for taxpayers who may be subject to an estate tax, estate planning for life insurance is necessary.

How do you keep the insurance policy out of the insured’s gross

Must Avoid Certain Grantor Trust Powers

ILIT and GST Tax Issues