An irrevocable life insurance trust is a contractual agreement to administer some property between a trustee and a grantor. In this case, it will be an insurance contractual agreement meant to benefit some named beneficiaries. This irrevocable trust cannot be amended in any way, neither can it be modified after it has been established.
Duties of the grantor and the trustee
The grantor may not reclaim ownership of property after his contribution to the trust, in other words he will not be able to change the terms and conditions of the trust in any way. In the same manner the trustee may not amend any detail in the contract. They are both responsible for making sure that the terms and conditions of the contract have been adhered to. Why execute a life insurance trust This is done for estate tax considerations. If the contract is properly done, the death benefits will be excluded in the gross estate of the insured. When drawing up the insurance trust, the terms of trust must include the beneficiaries and the selection procedure of the trustee successor. The need for a medical examination Medical examination must also be done because there is no need to do a trust if the client is not insurable. The attorney is the one who drafts the trust and the final draft should be signed by the client and the trustee. It is the trustee’s duty to apply for employer identity number
The trustee is the one who applies for life insurance and is responsible for signing the insurance contract. Before going ahead with the application, there are certain things which must be fulfilled. Payment of an initial premium Firstly, the grantor must pay a gift which will be the initial premium into the trust. A checking account The trust must have a checking account in its name. Notification of the gift Finally, the trustee must notify the beneficiaries about the gift. Once all this has been done, the trustee can conclude the application and pay the premiums. Importance of an irrevocable life insurance The trustee is the one who does all the administration and must make sure that premiums are paid on time. An irrevocable life insurance trust is a very important estate planning which will protect the surviving life insurance beneficiaries after you are gone.