WHOLE LIFE
Spotlight on Solutions
Funding a spousal lifetime access trust
Problem : Wealthy married couples often create irrevocable Life Insurance Trusts ( ILITs ) to own life insurance on their lives . If properly drafted , the trust will receive the life insurance proceeds at the insured ’ s death , free of income and estate taxes .
A common complaint about ILITs is that the grantor-insured ( the person who creates the trust – “ trust grantor ” – and who is the insured on the life insurance policy owned by the trust ) loses control over the assets transferred to the trust to fund the policy , including access to the life insurance policy ’ s cash value during the insured ’ s lifetime .
Lina R . Storm is the Advanced Sales Marketing Director dedicated to MassMutual ’ s Strategic Distribution team . She specializes in the promotion of advanced planning strategies and helping advisors to position and design optimal insurance solutions for clients .
Solution : By including spousal access provisions in the ILIT , which allows one of the spouses to be a beneficiary of the trust while the other spouse is the trust grantor , the trustee can make distributions from the policy ’ s cash values during the insured ’ s lifetime to benefit the beneficiary spouse .
In this way , the grantor spouse has indirect access to policy values through the non-grantor , beneficiary spouse . The guarantees of a whole life insurance policy and the potential to accumulate cash value beyond those guarantees through credited dividends makes whole life insurance an effective solution for a trustee to meet the trust ’ s objectives .
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30 Perspectives Q4 2022