How does an ILIT work?
You establish the ILIT, and name a trustee, other than yourself, to manage the ILIT. The trustee purchases an insurance policy, with you as the insured, and the trust as owner and beneficiary. The trustee uses cash that is gifted from you to the ILIT to purchase the policy. When the insurance benefit is paid after your death, the trustee will collect the funds, make them available to pay estate taxes and/or other expenses (including debts, legal fees, probate costs, and income taxes that may be due on IRAs and other retirement benefits), and then distribute them to the beneficiaries, or trusts for beneficiaries, you have named in the ILIT.
