Existing policy vs. new policy
If the ILIT applies for a new policy, the death benefit is excluded from the estate from day one.
ILITsLegacy Counsel
Irrevocable Life Insurance Trusts (ILITs)
Without an ILIT, a $5M life insurance policy on a NY resident with a $7M estate can push the estate over the cliff and cost the family roughly $1M in unnecessary state estate tax.
Key Points
- ◆Removes the death benefit from the insured's gross estate (3-year lookback applies on existing policies)
- ◆Crummey withdrawal rights convert premium gifts into present-interest gifts that qualify for the annual exclusion
- ◆Distribution structure can mirror the rest of the estate plan, in trust for spouse and descendants
- ◆Sited in a friendly state for long-duration trusts when paired with dynasty planning
Crummey notices are not optional
Each annual premium gift to the ILIT must be accompanied by Crummey notices to the beneficiaries giving them a temporary right to withdraw.
Frequently Asked
Why not just name an irrevocable trust as the beneficiary?+
Naming a trust as beneficiary affects where the proceeds go, but it does not change estate inclusion — the policy itself is still owned by the insured and the death benefit is in the estate.
Can I be the trustee of my own ILIT?+
No.
Next Step
Talk to Legacy Counsel.
Fixed-fee estate planning for clients in New York, New Jersey, and Ohio.
Drew Jacobs is licensed in New York, New Jersey, and Ohio. Nothing on this page constitutes legal advice or an offer to represent you in a jurisdiction in which we are not licensed.
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