Life Insurance Draft Book: A Comprehensive Guide

The Irrevocable Life Insurance Trust: Forms with Drafting Notes, Fourth Edition, is a book that offers a comprehensive overview of the types of insurance trusts you can draft for your clients. It includes examples of the necessary forms and a related client memorandum. The book guides you through one of the most fundamental aspects of sophisticated estate planning: drafting and setting up an Irrevocable Life Insurance Trust.

Types of insurance trusts

Life insurance trusts are an integral part of estate planning. They are a type of trust where the trust itself owns the life insurance policy, while the grantor is the named insured. There are two main types of life insurance trusts: irrevocable and revocable.

Irrevocable Life Insurance Trusts (ILITs)

Irrevocable life insurance trusts cannot be changed or terminated after they are in place. This means that whatever assets are placed with the trust will remain with the trust, including the cash value of a whole life policy.

Revocable Life Insurance Trusts (RLITs)

Also known as living trusts, revocable life insurance trusts can be changed or cancelled by the grantor. Assets in this type of trust remain part of the grantor's estate, so they could be subject to federal and state estate taxes. RLITs become irrevocable when the grantor passes away or becomes incapacitated, so the grantor's wishes are locked in at the time of their death.

How to protect your clients' estate and assets from taxation

Life insurance is an integral part of estate planning. The Irrevocable Life Insurance Trust: Forms with Drafting Notes, written by Donald O Jansen and Lawrence Brody, is a best-selling volume in the Insurance Counselor series. It guides readers through one of the most fundamental aspects of estate planning: drafting and setting up an Irrevocable Life Insurance Trust.

The book offers a comprehensive overview of the types of insurance trusts that can be drafted for clients, differentiating between the two types of trusts that can be used and helping readers identify the one that will work best for their clients' specific needs. It also includes examples of the necessary forms and a related client memorandum.

The two types of trusts are:

• Single Life Policy Trust: This is intended to primarily benefit the insured's spouse and children.
• Survivorship Policy Trust: This is meant to serve as a long-term, generation-skipping "dynasty" trust for the benefit of children and future descendants.

By using the information in this book, estate planners can help their clients protect their assets from taxation.

Single Life Policy Trust

Life insurance is an integral part of estate planning. The book *The Irrevocable Life Insurance Trust: Forms with Drafting Notes* by Donald O Jansen and Lawrence Brody is a user-friendly primer that offers a comprehensive overview of the types of insurance trusts you can draft for your clients. It includes examples of the necessary forms and a related client memorandum.

The book guides you through one of the most fundamental aspects of sophisticated estate planning: drafting and setting up an Irrevocable Life Insurance Trust. It differentiates between the two types of trusts you may use, identifying the best one that will work for your client.

One of the sample forms included in the book is the Single Life Policy Trust. This is intended to primarily benefit the insured's spouse and children. It is a type of insurance trust that is set up to provide financial protection for the insured's family in the event of their death. The trust is designed to ensure that the insured's spouse and children receive the benefits of the policy, rather than the insured's estate. This can help to protect the family's financial security and ensure that they have the resources they need to maintain their standard of living.

The Single Life Policy Trust can also help to simplify the process of distributing the insured's assets after their death. By naming the spouse and children as beneficiaries of the trust, the insured can avoid the need for probate, which can be a lengthy and costly process. This can help to reduce the financial and emotional burden on the family during an already difficult time.

Survivorship Policy Trust

Life insurance is an important aspect of estate planning. A life insurance trust is a legal entity that owns a life insurance policy. The trust is designed to protect the insured's assets and estate from taxation.

A survivorship policy trust is a type of life insurance trust that is meant to serve as a long-term, generation-skipping "dynasty" trust for the benefit of children and future descendants. It is also known as a survivorship standby trust (SST) or a "wait-and-see-trust". It is a flexible trust arrangement for young, wealthy married couples. The older spouse, or the spouse with the shorter life expectancy, will establish a revocable living trust to purchase a life insurance policy insuring both spouses' lives.

A survivorship policy trust can be used to fund multi-generational trusts that provide for future generations. It can also be used to fund buy-sell agreements or provide liquidity for estate taxes on a family business. However, it is important to note that survivorship life insurance does not provide any payout when the first spouse dies, which is a potential drawback. It can also be complicated to deal with in the event of a divorce, and ongoing premium payments are required throughout life.

A properly structured and managed survivorship policy trust will preserve access to the policy cash values for both spouses, with the intent of removing the life insurance from the estate of the surviving spouse. This can be particularly beneficial for younger, high net worth families who have a longer time horizon to plan through.

Estate planning

There are two types of life insurance trusts: a Single Life Policy Trust and a Survivorship Policy Trust. A Single Life Policy Trust primarily benefits the insured's spouse and children, while a Survivorship Policy Trust serves as a long-term, generation-skipping "dynasty" trust for the benefit of children and future descendants.

When creating a life insurance trust, it is essential to differentiate between the two types of trusts and identify the one that best suits the client's specific needs. This process involves drafting the necessary forms and a related client memorandum. By setting up a life insurance trust, individuals can protect their estate and assets from taxation, ensuring their loved ones receive the intended benefits.

The Irrevocable Life Insurance Trust: Forms with Drafting Notes, authored by Donald O Jansen and Lawrence Brody, is a popular resource for estate planners. It provides a comprehensive overview of the types of insurance trusts available, along with examples of the required forms and memoranda. This user-friendly guide helps professionals advise their clients effectively and make informed recommendations regarding life insurance and estate planning.

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