Hi,

I am considering setting up an irrevocable life insurance trust, which I know generally hold term life policies. Can they also hold AD&D policies? How about employer-paid variable universal life policies? Thank you very much!

Marie

Marie, yes an insurance trust can hold an AD&D policy, however the insured/settlor may not have access to the insurance benefit in the case of a dismemberment. This is because the typical insurance trust does not give the insured any benefit in the trust or control over the policy. So it can be done but is not practical.

As far as the employer paid VUL policy, it can be held through an insurance trust. The employee should make an irrevocable designation of the trust as owner. And every time the employer pays the premium it is the equivalent of the insured/employee making a gift of the premium to the trust (so all normal rules for gifts to insurance trusts apply).

Hope this helps

Claudio

Zip Code: 11042

Thanks for the advice! I plan to place an employer-paid life insurance policy within my ILIT. However, my employer pays the life insurance premiums weekly with every paycheck. In this situation, how do you handle notifying the beneficiaries of their withdrawal rights? Does one annual Crummey letter suffice?

Thanks so much!
Marie

Marie-

I will have Claudio reply to your message again. Just so you know, he can be reached directly at (516) 328-1874 or by email to cdevellis@abramslaw.com. You can also view his bio at www.abramslaw.com

Zip Code: 11797