"What is a Gift Trust?" is a common question among new clients. Gift Trusts are also know as Irrevocable Life Insurance Trusts (ILITs). This brief video blog explains what is a Gift Trust and when to use it.
What is a Gift Trust or Irrevocable Life Insurance Trusts (ILITs)?
A Gift Trust is a special type of Irrevocable Trust often used in estate planning. Gift Trusts are also known as Irrevocable Life Insurance Trusts (ILITs). With such a trust, the Settlor who created the trust will donate money or property into the trust, which then manages that property for the benefit of the Trust Beneficiaries, who are often the Settlor’s family members.
Importantly, a gift trust is typically Irrevocable– meaning assets placed into the trust may not be later reclaimed by the person giving the gift.
So if you wanted to give gifts to family members, why not just give the gifts directly instead of spending the money for a lawyer to create a gift trust?
Well, there are several reasons – and, unfortunately, most are too complicated to explain in detail in a 90 second video blog. But the most important reasons are:
- Tax Savings – by removing the property permanently from the estate of the person giving the gift and placing it in a gift trust, the government may be unable to apply estate or death taxes on that property;
- To provide for loved ones far into the future – the money and property conveyed to a gift trust is warehoused and managed for use in the future and may not be accessed by your loved ones today;
- Creditor protections – meaning creditors of your beneficiaries – say from a divorce or bankruptcy or second marriage - are unable to gain access to gifts you place in a gift trust instead of outright to your spouse or children.
For people with significant personal wealth who want to provide for family members in a protected and tax efficient manner, irrevocable gift trusts may be a vehicle for accomplishing their goals.
To watch more from our video blog click here. Also to know more about "What is a Trust?" click here.
Watching any of our video blogs creates no attorney-client relationship. We are Tax Lawyers who also practice Estate Planning Law.