Irrevocable Life Insurance Trust (ILIT)
Definition - What does Irrevocable Life Insurance Trust (ILIT) mean?
An irrevocable life insurance trust is a trust set up by a grantor which contains a life insurance policy. Once the grantor sets up the trust, he or she loses control of the assets in the trust. Typically, people set up such trusts to name their children or other relatives as beneficiaries and to protect the assets until the time of death when the benefits kick in.
Justipedia explains Irrevocable Life Insurance Trust (ILIT)
The advantage of an irrevocable life insurance trust is that it removes property or other assets from the direct ownership of the person. This can prevent the beneficiary from losing the assets due to various reasons such as creditors trying to seize assets following the grantor's death. Irrevocable life insurance trusts are basically just a way for people to create safe havens for life insurance benefits that they would like to be managed in a certain way. Irrevocable life insurance trusts are used in estate planning.