business Do You Have an Irrevocable Life Insurance Trust? Proposed Legislation May Impact You October 19, 2021 The House Ways and Means Committee recently released proposed legislation indicating that the effective use of irrevocable life insurance trusts will be limited for estate planning purposes. . Here’s what you should know. If you have an irrevocable life insurance trust, you will want to read up on recent legislation proposed by the House Ways and Means Committee. Let’s dive in. What is an irrevocable life insurance trust? An irrevocable life insurance trust, or ILIT, is a legal entity, after its initial creation, cannot be altered, amended, or revoked. Current rules Currently, those with irrevocable life insurance trusts make annual gifts to the trust to pay the premium on the insurance owned by the trust. Under current law, the use of a life insurance trust keeps the policy death benefit out of their taxable estate. Proposed changes This type of trust will be less effective in keeping the death benefit proceeds out of the Grantor’s estate under the proposed changes by the House Ways and Means Committee. The portion of life insurance affiliated with premiums paid into to the trust after the date of enactment would be subject to estate tax at death if the proposal becomes law. How likely is it to pass? As of now, it is unclear whether the proposed changes will pass. The life insurance industry is lobbying to defeat the proposed legislation. What should I do now? It is best to speak with your insurance advisor to see how these possible changes could impact your ILIT. In certain cases, it may make sense to make additional cash gifts to insurance trusts now for future premium payments, or look at exercising other available options under the terms of the life insurance policies owned by the trust. We will keep you posted as legislation evolves. Please reach out to us if you have any questions or would like to discuss your individual situation.