Typically, in the opening provisions of an ILIT, the settlor transfers the ownership of the ILIT to the trustee.
In Irrevocable Life Insurance Trusts (3/9/2016), H. Wes Taylor explains why the change in ownership is required:
Planning Tip. When funding an ILIT with an existing life insurance policy, it is critical that the insured settlor transfer ownership of the policy to the trustee, who in turn names the trust as beneficiary. Simply naming the ILIT as beneficiary of the insurance policy, without a change in ownership, is insufficient to divest the insured of incidents of ownership.
Sample language from an ILIT with a second-to-die life insurance policy:
The Settlors hereby irrevocably assign, transfer and set over to the Trustees the insurance policies, described and listed in Schedule A, including, without limitation, the right to receive all or a portion of the proceeds thereof.
The following example is from a sample Irrevocable Unfunded Life Insurance Trust from Estate Planning with Life Insurance by Douglas H. Evans:
The Donor hereby transfers and delivers unto the Trustees the property described in Schedule A, attached hereto, the receipt of which is hereby acknowledged by the Trustees. [The Donor has caused or may cause to be assigned to the Trustees the Donor’s entire interest in certain insurance policies on the Donor’s life, and has caused or may cause the Trustees to be named as the beneficiary to receive the proceeds of such policies and of certain pension or other benefit plans in which the Donor participates;]