📑 Sample ILIT Structure & Outline--the data below is used as an example only!
- Tim Gordon
- Aug 22
- 2 min read
1. Trust Name
“The Timothy Gordon Irrevocable Life Insurance Trust, dated [Month Day, Year]”
2. Parties
Grantor (Settlor): Timothy Gordon
Trustee: [Name of independent trustee — trusted family member, attorney, or corporate trustee]
Beneficiaries:
Primary: Denise Gordon (spouse)
Secondary: Children Gordon
Optional: Grandchildren or charitable beneficiaries
3. Trust Purpose
To hold ownership of life insurance policies on the life of the Grantor.
To provide financial security for the spouse and descendants.
To keep insurance proceeds outside the Grantor’s taxable estate.
4. Trust Assets
5. Trustee Powers
Hold, manage, and invest trust property.
Collect life insurance proceeds.
Pay policy premiums (with funds gifted by the Grantor).
Distribute or accumulate income/principal for beneficiaries under the terms below.
6. Funding / Premium Payments
Grantor makes annual gifts to the ILIT.
The trustee uses gifts to pay insurance premiums.
Crummey Notice: Trustee provides written notice to beneficiaries each year of their right to withdraw their share (to qualify gifts for annual exclusion).
7. Distribution Provisions
Upon Grantor’s Death:
Trustee collects policy proceeds.
Income to spouse (Denise) for life.
Principal distributions allowed for health, education, maintenance, and support (HEMS standard).
At spouse’s passing → remainder to children (outright or in trust, depending on your choice).
Contingent Beneficiaries: If children predecease, funds may be directed to grandchildren or charity.
8. Special Clauses
Spendthrift Clause – protects beneficiaries’ interests from creditors.
No Power of Appointment – beneficiaries cannot redirect assets.
Irrevocability – a trust cannot be changed or revoked once signed.
Trustee Succession – name alternates if the first trustee cannot serve.
9. Termination
Trust terminates when all assets are distributed (e.g., after the spouse’s lifetime and the child receives the final distribution).
✅ Key Notes for You
Best to have the ILIT purchase new policies rather than transfer existing ones (avoids 3-year IRS lookback).
Since you already have term policies, you and Denise could assign them to the ILIT — but the 3-year rule would apply if you pass within 3 years.
You may also consider having the ILIT purchase a new permanent policy (e.g., Guaranteed Universal Life) for long-term estate liquidity.
Your role ends after creating the trust — only the trustee can handle administration.
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