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When should you use an ILIT in California?

On Behalf of | Feb 8, 2023 | Trusts

Trusts are a popular estate planning tool for California residents. One of the options is an irrevocable life insurance trust (or ILIT for short), which is a popular option for a few reasons.

Benefits of an ILIT

The ILIT – as the name suggests – is made with a life insurance policy as the main asset. You can add to it, but the life insurance policy will be the chief asset.

ILITs also have strict rules for how beneficiaries should spend the money and under what circumstances it should be dispersed. This gives the person setting up the trust more control over how their money is spent, even after death.

This option also protects your assets and investments from automatically going to estate taxes or creditors. These protections give your family cushioning, regardless of the other factors at play.

When are ILITs useful?

Many people use ILITs to support their beneficiaries throughout their life. Since there are stricter rules for how the money is used, there’s no chance of children or grandchildren burning through their entire inheritance.

Since ILITs aren’t owned by the beneficiary, the court can’t claim it’s an asset – and creditors can’t garnish from it either. This means no matter what kind of debt or legal trouble your beneficiary gets into, they’ll always have the trust to fall back on.

ILITs are also a popular estate planning tool to take care of a person who cannot care for themselves. If a person has a disability or can’t make financial decisions, the ILIT will ensure they’re taken care of.

What are the downsides?

There are plenty of downsides to an ILIT, including the cost of establishing one. It’s also impossible to change or take back whatever you put into the trust. With that being said, many people still find ILITs to be popular estate planning tools.


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