Tampa Irrevocable Life Insurance Trust Attorney

For many Tampa-area residents, purchasing a life insurance policy is a key part of their estate plan. Such insurance can provide family members with an immediate source of cash upon a loved one’s death. In some cases, life insurance can also be used to pay an anticipated federal estate tax bill.

But if you are contemplating using life insurance to cover a possible estate tax obligation, you may wish to consider establishing a special trust to own and manage the policy. A qualified Tampa irrevocable life insurance trust attorney can provide you with guidance and advice in this area. Knudsen Law is a full-service Florida estate and probate firm that assists clients, particularly high net-worth individuals, in structuring their life insurance policies so that they do not end up creating an additional burden on their future estates.

Who Needs a Florida ILIT (and Why)?

If you are a high net-worth individual concerned about the estate tax, purchasing a life insurance policy may seem like the perfect solution. You simply buy a policy with a large enough benefit to pay the bill. The flaw with this approach is that if you simply own a policy and name your estate as beneficiary, then the life insurance itself is considered an estate asset subject to tax.

With an irrevocable life insurance trust (ILIT), you fund a separate trust to purchase and own your life insurance policy. The trust is considered “irrevocable” under Florida law, meaning once established, you cannot easily undo the trust. You also cannot serve as your own trustee, as you can with a revocable living trust. As the ILIT is the legal owner of the life insurance policy, any proceeds upon your death are paid to the trustee rather than your estate or any of your beneficiaries.

Typically, what happens with an ILIT is that once the trustee receives the payout from the insurance policy, they can then purchase assets from your probate estate so that your personal representative (executor) has sufficient cash to pay any estate tax bill. Without an ILIT, your estate might have to quickly liquidate assets to pay the government. This can make it impossible to transfer certain valuable assets, such as a business or home, to your family or other beneficiaries.

As with any estate planning trust, an ILIT also has named beneficiaries who receive whatever assets remain in the trust upon your death and after any tax obligations are satisfied.

A Tampa Irrevocable Life Insurance Trust Attorney Can Answer Your Questions

An ILIT can benefit many Tampa estates, even those left by people who do not consider themselves high net-worth individuals. But these trusts need to be carefully structured and managed to ensure they comply with all relevant federal tax laws. A qualified Tampa irrevocable life insurance trusts attorney can explain these requirements to you in greater detail. If you would like to speak with a lawyer about this or any other Florida estate planning matter, contact Knudsen Law today at (727) 398-3600 to schedule a consultation.