Irrevocable life insurance trusts (ILITs) have previously been used as the cornerstone of many estate plans. But with the passage of the Tax Cuts and Jobs Act, there are a plethora of changes affecting various facets of estate planning, and the traditional use of the ILIT is certainly among those numbered. Clients who were once focused on mitigating their estate taxes may now find themselves more concerned with income tax. The tax-favored envelope that is the permanent insurance policy may be more valuable to those clients who are now facing state and local tax deduction restrictions or capital gains costs. The time may have come for the standard ILIT to give way to a more multifaceted and robust vehicle, the Multipurpose ILIT (MILIT). A MILIT might contain a permanent life insurance policy, as would a standard ILIT, along with various additional assets. For the client, the MILIT eliminates the need for multiple trusts and may offer more benefits than its seemingly outdated cousin.
See Barry D. Flagg, Thomas Tietz, & Martin M. Shenkman, Tax Reform Opens the Door for Multi-Purpose ILITs, Wealth Management.com, January 29, 2018.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.
