I often write separate articles about the tax magic of irrevocable life-insurance trusts (ILITs) and intentionally defective trusts (IDTs). Now get ready for the wedding ceremony joining ILITs and IDTs. An ILIT allows the death benefits of the life insurance it purchases to be received tax-free - no income tax and estate tax. A fly in the ointment: Necessary gifts each year by the trust creator to pay premiums kicks up a gift-tax problem. Marrying an ILIT to an IDT eliminates the problem, and also creates a host of tax-free and wealth-building opportunities.
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