ILIT Details

[eloxley]

What is the name of your state? Ohio

I've been doing some research on ILITs, and have some questions. Any clarification would be appreciated.

If an individual creates an ILIT, with an adult child as the beneficiary and gifts the premium payments to the beneficiary, can the ILIT still be part of a marital or survivorship trust and pass to the surviving spouse rather than the adult child upon the death of the ILIT creator? Wouldn't that defeat the purpose of the trust in the first place?

Thanks in advance for any help!

 

[tranquility]

No and yes. An irrevocable trust cannot be completely controlled by a revocable trust to the point of overcoming the terms of the irrevocable ILIT. In this case, even if you could do this, you would defeat the purpose of the ILIT.

 

[eloxley]

No and yes. An irrevocable trust cannot be completely controlled by a revocable trust to the point of overcoming the terms of the irrevocable ILIT. In this case, even if you could do this, you would defeat the purpose of the ILIT.

So, if the adult child had received Crummey notices regarding the ILIT over the years, and then the grantor passed away, it would stand to reason that the adult child beneficiary would then receive the proceeds from that trust, right? Would it be possible to have the proceeds then pass to the surviving spouse rather than the adult child through a survivorship or marital trust instead and still avoid estate taxes?

Thank you.

 

[sturgbe]

The surviving spouse gets everything without taxes or probate (unlimited marital deduction). There is no need for an ILIT.
However, if the parents wishes were to pass the estate on to the adult child free of income and estate tax, then an ILIT would be a great idea. A second to die policy may be the vehicle of choice. More leverage!

If the mother/spouse needs the proceeds of the life insurance for living, then an ILIT would not be needed for the adult child (unless it was a big enough death benefit). If this were the case, then it appears that they may not need this type of estate planning anyway. I really don't have enough information to give specific advice.

sturgbe

 

[tranquility]

I'm not sure what's happening in your scenario either. Give a little taxonomy with names and relationships and a basic understanding of the trust wordings.

 

[eloxley]

I'm not sure what's happening in your scenario either. Give a little taxonomy with names and relationships and a basic understanding of the trust wordings.

Grantor set up ILIT many years ago, naming 2 adult children as beneficiaries. Beneficiaries received multiple Crummey notices over the years, and allowed the gifted monies to be added to the trust or pay premiums. Upon the grantor's death, one of the adult children is stating that the decedent left all assets to his surviving spouse thru family and marital trusts. This is a very sizeable estate, and I do not have access to the details of the trusts or the exact amount involved. This same adult child of the decedent also received a waiver of probate notice, which stated that it was sent to those designated as beneficiaries of the estate. The decedent was extremely intelligent and would not have created a trust that would have any negative or questionable tax circumstances.

Would it be at all possible or advisable to create an ILIT with children as beneficiaries, and have the trust pass to a marital or survivorship trust upon death? I just don't understand how this works. Wouldn't the fact that the adult child received the Crummey notices over the years imply that he/she was a beneficiary of the ILIT? If having the ILIT pass to the surviving spouse still avoids estate taxes, then I guess I could see why it would be set up that way. But I would just like some clarification if at all possible.

Thanks again.

 

[tranquility]

Everything you write is mostly understandable, except when you start making value judgments about the intellegence of the person. You never know what someone is thinking. However, when you write:

Would it be at all possible or advisable to create an ILIT with children as beneficiaries, and have the trust pass to a marital or survivorship trust upon death?

This is a non-sequiter. When you say "have the trust pass", what do you mean? Do you mean the beneficiaries change? Do you mean the trustee changes? Do you mean the owner of the insurance policy changes? What is meant? An ILIT can only be changed by the terms of the ILIT. If the terms have a change of beneficiary in the case of a certain event happening or not happening, it's possible--but it's not done. That kind of defeates the purposes of why an ILIT would be formed.

Married couples can make a second to die ILIT were the funds go to a trust to pay for the estate taxes of the second spouse to die. This may be what is happening here, but without seeing the trust and knowing what is being claimed, exactly, it's only a guess.

 

[eloxley]

Everything you write is mostly understandable, except when you start making value judgments about the intellegence of the person. You never know what someone is thinking. However, when you write:



This is a non-sequiter. When you say "have the trust pass", what do you mean? Do you mean the beneficiaries change? Do you mean the trustee changes? Do you mean the owner of the insurance policy changes? What is meant? An ILIT can only be changed by the terms of the ILIT. If the terms have a change of beneficiary in the case of a certain event happening or not happening, it's possible--but it's not done. That kind of defeates the purposes of why an ILIT would be formed.

Married couples can make a second to die ILIT were the funds go to a trust to pay for the estate taxes of the second spouse to die. This may be what is happening here, but without seeing the trust and knowing what is being claimed, exactly, it's only a guess.

Could you explain the second to die ILIT? I apologize if my terminology is not correct in my postings, but frankly, if I understood all of it, I wouldn't need to be asking the questions!

All I know is that the adult child rec'd the Crummey notices, and that he is/was the beneficiary of an rather substantial ILIT and is now stating that all assets have gone to the surviving spouse. Then he receives a waiver of probate notice, and well,... just trying to understand all of this. I was also told that the surviving spouse will pay no estate tax.

Thanks again for the help.

 

[tranquility]

Go to Google, use the search string:

"second to die" ILIT

Read the sources which interest you.

 

[eloxley]

Go to Google, use the search string:

"second to die" ILIT

Read the sources which interest you.

Thank you, I read several sources before posting. Given the circumstances I described, does it sound like a second to die ILIT? If it was, would the adult child have received the Crummey notices as well as the waiver of probate notice?

 

[tranquility]

No. Your facts don't make sense. I can only guess without knowing the actual facts. I put out the explination because I can twist the facts a little to fit it in there. I don't know as you don't know enough for me to form an opinion.

 

[eloxley]

No. Your facts don't make sense. I can only guess without knowing the actual facts. I put out the explination because I can twist the facts a little to fit it in there. I don't know as you don't know enough for me to form an opinion.

I realize the information I have doesn't make sense, which is why I'm posting here trying to get a clue as to what may actually be going on. I've read quite a bit online about ILITs, as well as second to die trusts, Crummey notices, and now the probate waiver notices. I'm trying to put everything together in a manner that actually makes sense, and am hoping to gleen a little insight from those on this forum with some knowledge of how these policies work.

All I have is what I've posted above. If I had a copy of the actual trust, I could read it myself to see what the details are. Can you possibly help me out by cluing me in on what specific information you would need to know?

In a nutshell, I'm trying to determine if I'm being told the truth by those closest to the situation, or if there is more to the story than what I'm getting. I just don't understand why, if it was a second to die ILIT, the adult child beneficiary would receive both Crummey notices and then the waiver of probate in the event of the the grantor's death.

Thank you.