Protecting life insurance proceeds for future generations.

An Irrevocable Life Insurance Trust (ILIT) is a specialized trust designed to own and administer life insurance policies outside of an individual’s taxable estate. When properly structured and administered under South Dakota’s modern trust laws, an ILIT may provide significant federal estate tax planning opportunities, liquidity for beneficiaries, and long-term control over how life insurance proceeds are distributed and managed.

How It Works

Estate Planning with an ILIT

An Irrevocable Life Insurance Trust is established to own one or more life insurance policies outside of the insured’s taxable estate. Because the trust—not the insured—owns the policy, the life insurance proceeds may be excluded from the insured’s taxable estate while remaining available to benefit family members according to the terms of the trust.

Following the insured’s death, the trustee administers the trust and distributes or manages the proceeds according to the grantor’s instructions.

If the ILIT receives annual gifts to pay insurance premiums and is drafted with Crummey withdrawal powers, those gifts can qualify for the federal annual gift tax exclusion.

Trustee Selection

Independent ILIT Administration in South Dakota

Selecting the right trustee is one of the most important decisions when establishing an ILIT. An independent trustee helps ensure objective administration while working collaboratively with attorneys, insurance professionals, financial advisors, and tax professionals throughout the life of the trust.

Combined with South Dakota’s modern trust laws—including Dynasty Trust planning, Directed Trusts, enhanced privacy protections, and flexible trust modification provisions—Bridgeford Trust Company provides families with a sophisticated platform for the long-term administration of Irrevocable Life Insurance Trusts.