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An irrevocable life insurance trust, (ILIT,) has three aspects: First, the grantor is the person creating the
trust, and they gift their life insurance irrevocably to the trust. Second, the trustee
is selected by the grantor and manages the trust. Third, the trust
beneficiaries named by the grantor will receive the trust assets after they die.
To do this, the trustee
purchases an insurance policy, with themselves as the insured, and the trust as owner
and, (usually,) beneficiary. When the insurance benefit is paid at the death of
the grantor,
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 trust beneficiaries as the grantor instructed.
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