Effective Administration of Irrevocable Life Insurance Trusts (ILITs): Best Practices, Crummey Notices, and Avoiding Pitfalls

In this program, Leah Del Percio, President, CEO, and co-founder of Trustate, provides a comprehensive overview of Irrevocable Life Insurance Trusts (ILITs), their administration, and their role in estate planning. This program covers the purpose and mechanics of ILITs, including their tax benefits and the responsibilities of the grantor, trustee, and beneficiaries. A key focus is the Crummey power and notices, detailing their role in gift tax exclusion, timing and content requirements, and best practices for drafting and delivering Crummey letters. Del Percio also examines the proper funding of an ILIT with life insurance, including ownership and beneficiary designations, the transfer of existing policies, and compliance with tax regulations such as the "three-year rule." Common pitfalls in ILIT administration, including errors in Crummey notices, improper funding, and trustee mismanagement, are addressed with actionable strategies to mitigate tax and legal risks.

Learning Objectives:

1. Explain the purpose and mechanics of Irrevocable Life Insurance Trusts (ILITs)

2. Review proper ILIT administration, including the Crummey notice and letter process

3. Apply best practices for funding an ILIT with life insurance policies

4. Identify common ILIT administration pitfalls and strategies to avoid them