Life Insurance Trust
- A trust set up to act as both the owner and beneficiary of a life insurance policy. In the event of the policyholder's death, the insurance policy's death benefit is placed into the life insurance trust and proceeds are then distributed to beneficiaries in accordance with the rules stipulated in the trust. A life insurance trust, also known as "trust-owned life insurance", or as an "irrevocable life insurance trust (ILIT)", is commonly used in estate planning to help evade taxation.
irrevocable life insurance trust, trust-owned life insurance
Related Terms and Acronyms
- Death Benefit (DB) — Acronym, Very Important,
➥ An amount paid to a beneficiary in a life linsurance policy.
- A payment or series of payments made to the beneficiaries of a life insurance policy.
- Estate Planning — Definition,
- The process of determining how assets will be dispersed after an individual's death, ideally in the most tax-efficient way possible.
- Informal Trust — Definition,
- Also known as in-trust account or "bare" trust, this is an investment account registered in an adult's name in trust for a child. The account is used to save/invest funds for a child, and the funds must be reserved for and used by the beneficiary child.
- Irrevocable — Definition,
- Irrevocable Beneficiary — Definition,
- A life insurance or segregated fund beneficiary whose benefit cannot be revoked or modified in any way without his or her consent.
- Irrevocable Life Insurance Trust (ILIT) — Acronym,
- Life Insurance — Definition, Very Important,
➥ CanEquity offers life insurance.
- An arrangement where an insurer agrees to pay a benefit to one or more beneficiaries in the event of the policyholder's death.
- Second-To-Die Insurance — Definition,
- Life insurance that only pays a death benefit when both spouses have died, commonly used in estate planning.
- Sprinkling Provision — Definition,
- A provision that gives a trustee the authority to distribute life insurance death benefits as he or she sees fit, and to those who need the money the most.
- Trust — Definition,
- A fund established like a will, specifying how money or property will be disbursed, lists the recipients or beneficiaries and names one or more trustees to manage the assets. An irrevocable trust can't be changed after the terms are finalized; a revocable trust has more legroom in how much can be transferred, but is usually costlier to maintain.