VanNess & VanNess, P.A.

Duties of the trustee for an ILIT

Taxes can eat up a chunk of an estate before any distribution of assets to beneficiaries. Florida residents looking to ensure their beneficiaries receive all or most of the assets left to them will want to consider the many trust vehicles. These have typically been designed for the purposes of protecting the decedent's wishes and protecting the estate from legal challenges. However, each type has certain requirements. A most important need in setting up an irrevocable life insurance trust is ensuring a responsible trustee understands the responsibilities.

An irrevocable trust holding one or more life insurance policies requires that some assets are available to pay premiums and that premiums are paid on time. This means the trustee will have to keep a separate account for assets owned by the ILIT and document any movement of these funds, including as they are used to pay premiums. There may be a need to fund the trust periodically to ensure premium payments. This will create more duties for the trustee.

Other requirements for trust administration include communicating with insurance companies, filing tax returns for the irrevocable trust and safekeeping up-to-date originals of all policies. Even with a highly skilled administrator, periodic audits by outside professionals are often a routine part of maintaining viability of the trust vehicle.

Though complex, an ILIT can remove significant assets from the grantor's taxable estate after the trust is funded. A Tampa resident with significant assets may use this method to reduce future estate taxes. It could also be used to control the distribution of assets to one or more specific beneficiaries over a set period of time. Due to the complexity of this type of a vehicle and the duties that are involved, trustees may want to enlist the aid of an experienced attorney.

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