Irrevocable Life Insurance Trust
(TX)


Summary

This template is an irrevocable life insurance trust and may be used in Texas as part of a coordinated estate and gift tax planning strategy for a high net worth person to remove a large asset from their estate for federal tax purposes. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. During the settlor's lifetime, the beneficiaries of the trust have "Crummey" powers to withdraw gifts made to the trust. These withdrawal rights are designed to qualify any gifts made to the trust (i.e., funds to pay premiums on the insurance policies) for the annual gift tax exclusion. See I.R.C. § 2503(b) and Crummey v. Comm'r., 397 F.2d 82 (9th Cir. 1968).Irrevocable Life Insurance Trusts (ILITs) involve tax planning and require strict compliance for the settlor to obtain the favorable tax treatment intended. There are several potential pitfalls unique to the settlor, the trustee, and the beneficiaries which are addressed in drafting notes throughout ...