Life Insurance FundamentalsQuestion 138 of 315
What is the main estate planning advantage of an Irrevocable Life Insurance Trust (ILIT)?
a.It lets the insured take tax-free policy loans at any time
b.It eliminates the requirement for insurable interest
c.It keeps the policy's death benefit outside the insured's taxable estate
d.It allows the insured to remain the owner and trustee of the policy
Explanation
An ILIT owns the policy in place of the insured, so when the insured dies the death benefit is paid to the trust and is excluded from the insured's taxable estate. The trust must be irrevocable, and existing policies transferred in are subject to a three-year look-back.
Law Reference: IRC §2042; estate planning principlesPractice all 315 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)