Are Irrevocable Life Insurance Trusts Worth the Premium?

The wealthy have flocked to irrevocable life insurance trusts (ILITs) to shield their heirs from federal estate taxes. It essentially makes sure that the death benefit is large enough to fully pay for the estate tax bills when the grantor dies. Because Congress has raised the gift tax exemption from $1 million to $5 million, many wealthy families are pondering whether the payment of $30,000 in insurance premiums for the ILITs are still worth it. Insurance advisors recommend maintaining them as the gift tax exemptions are volatile and could easily change in 2012. However, they do recommend individuals to do their due diligence in reviewing or even switching ILITs to ones that are more suitable.