Owning a life insurance policy at death can unintentionally increase estate taxes. An Irrevocable Life Insurance Trust, or ILIT, can minimize these tax consequences by allowing the policy to be held outside your taxable estate while still providing financial support for the people you choose. At The Law Offices of Patricia Bloom-McDonald, we work with individuals and families in Westport and throughout Massachusetts to create and maintain ILITs that support long-term estate planning goals. We help clients keep control over how life insurance proceeds are managed, distributed, and shielded from avoidable estate taxes.
Why Work With The Law Offices of Patricia Bloom-McDonald
Choosing the right attorney matters when creating an irrevocable trust. Our clients work with us because we offer:
- Focused estate planning representation grounded in Massachusetts law
- Clear explanations of complex trust structures without legalese
- Careful coordination between ILITs, last wills and testaments, and other trusts
- Ongoing guidance as laws, family needs, and assets change
- Personalized planning rather than one-size-fits-all documents
We take the time to understand your goals and translate them into a trust structure that works in practice, not just on paper.
What Is an Irrevocable Life Insurance Trust?
An Irrevocable Life Insurance Trust is a trust created to own and manage a life insurance policy. Once established, the trust, not you, owns the policy. Because of that ownership structure, the death benefit is generally excluded from your taxable estate under federal and Massachusetts estate tax rules.
The trust names a trustee to manage the policy and, later, the proceeds. Beneficiaries receive distributions based on the terms you set in the trust document. Since the trust is irrevocable, changes are limited, which is why proper drafting at the outset is so important.
How an ILIT Reduces Estate Tax Exposure
When a life insurance policy is owned personally, the full death benefit can be included in the taxable estate. That inclusion can increase or even trigger estate tax liability. An ILIT removes the policy from your estate, thereby significantly reducing your overall tax burden.
This approach can be especially valuable for Massachusetts residents because the state estate tax threshold is lower than the federal threshold. An ILIT often becomes part of a broader plan designed to preserve assets for heirs rather than taxes.
Funding and Managing an ILIT
ILITs can be funded in different ways. Some trusts purchase a new life insurance policy. Others receive ownership of an existing policy. Each option has legal and tax implications that must be addressed carefully.
Ongoing management matters just as much as setup. Trustees must handle premium payments properly, often using annual exclusion gifts and required notices to beneficiaries. We help clients structure these steps so the trust remains compliant over time.
Who Should Consider an ILIT?
An ILIT may be appropriate if you:
- Expect your estate to exceed state or federal estate tax thresholds
- Want life insurance proceeds to be used for specific purposes, such as supporting children or paying estate expenses
- Have beneficiaries who need structured or delayed distributions
- Own a closely held business or illiquid assets that could create tax pressure at death
We review your financial picture and estate plan to determine whether an ILIT supports your goals or if another strategy is a better fit.
How ILITs Fit Into a Broader Estate Plan
An ILIT rarely stands alone. It often works alongside a revocable living trust, last will and testament, beneficiary designations, and gifting strategies. Coordination is key. Poor alignment between documents can undo the benefits of careful planning.
We look at the full structure of your estate plan to ensure the ILIT complements, rather than conflicts with, your other planning tools.
Talk With a Westport Irrevocable Life Insurance Trust Attorney
An ILIT can provide long-term tax and planning benefits, but only if it is set up correctly and maintained over time. We help clients create ILITs that reflect their intentions and comply with Massachusetts and federal law. To discuss whether an ILIT makes sense for your estate plan, contact The Law Offices of Patricia Bloom-McDonald to schedule a consultation.
Frequently Asked Questions on Irrevocable Life Insurance Trusts
Can I be the trustee of my own ILIT?
No. Serving as a trustee can cause the policy to be treated as part of your estate. An independent trustee is required.
Can an ILIT own more than one policy?
Yes. A single ILIT can hold multiple life insurance policies if structured properly.
What happens if I stop funding the trust?
Failure to fund premiums can cause a policy to lapse. Ongoing planning helps avoid this risk.
Is an ILIT only for high-net-worth families?
Not necessarily. Massachusetts estate tax rules mean ILITs can be useful for estates well below federal thresholds.