Revocable vs Irrevocable

Using a Life Insurance trust for the purpose of estate planning can be very beneficial to you and your heirs. 

Think of a trust as a financial arrangement that allows a third party, or trustee, the right to hold assets on behalf of a beneficiary or beneficiaries.

There are two forms of trusts that are used to hold life insurance:

Irrevocable Life Insurance Trusts (ILIT’s) 
are created to hold and manage a permanent or term life insurance policy while the insured is still living; as well as to administer and distribute the proceeds when the insured dies.
ILIT’s can minimize estate taxes since ownership of life insurance policy is owned entirely by the trust and not the insured.
This means that all premiums paid towards policy must come from a checking account owned by ILIT.
If a policy has accumulated high cash value, having a ILIT is highly beneficial because the proceeds of a death benefit are not considered part of the insured gross’s estate and therefore not subject to the state or federal estate taxation.
ILIT’s allow you and your beneficiaries to see the full effect of your inheritance benefits by protecting you and your heirs from taxes and providing more liquidity of assets that can be sued to pay debts or other expenses.

Revocable Life Insurance Trusts (RLIT’s)
differs from ILIT’s in the sense that there is more control and flexibility.
You can make amends or revoke the trust at any time.
Having a revocable life insurance trust can also be beneficial if you know you are under the estate tax exemption amount. 
You can also file taxes for the assets in this trust using your social security, which an ILIT cannot.
A RLIT does not eliminate transfer or income taxes, only a ILIT does.
RLIT’s can also own and hold life insurance policies.
Your trustee will be able to manage and administer the life insurance policy in the event you become incapacitated.