A life insurance trust, most commonly an irrevocable life insurance trust, is a legal entity created to own and control life insurance policies for the benefit of designated beneficiaries. The trust, rather than the insured, is the policy owner and beneficiary, and the trustee manages premiums, policy decisions, and distribution of proceeds according to the trust document. Properly structured, a life insurance trust can keep death benefits outside the insured's taxable estate, provide creditor protection, control the timing and manner of distributions to heirs, and coordinate with other estate planning tools. Funding often involves the insured making annual exclusion gifts to the trust, supported by Crummey withdrawal powers.

In everyday advanced planning, advisors encounter life insurance trusts when working with affluent families, business owners, and clients concerned about estate taxes or multi generational control. They collaborate with estate planning attorneys to draft trust documents and to ensure that ownership and beneficiary designations correctly point to the trust. Advisors help trustees manage premium funding, often coordinating gift notices, and monitor policies over time to ensure performance aligns with the trust's objectives. When the insured dies, the trustee receives death proceeds free of estate tax in many cases and distributes funds for purposes such as estate tax payments, ongoing family support, or business recapitalization. Advisors also participate in reviewing older ILIT arrangements that may need policy restructuring or trust modifications. By understanding how life insurance trusts work, producers can design ownership structures that maximize tax efficiency and protect beneficiaries while respecting the client's control and legacy wishes.