If you’ve worked hard to build a legacy and want your family to benefit from every dollar—not the IRS—now is the time to act.
Right now, the federal estate tax exemption is at an all-time high: $13.61 million per person in 2024 (indexed for inflation from the 2017 Tax Cuts and Jobs Act). But unless Congress acts, this exemption will be cut in half by January 1, 2026, dropping to approximately $6.8 million per person (based on inflation estimates).
That means millions of dollars in life insurance death benefits and other assets could be exposed to a 40% federal estate tax—unless you plan ahead using tools like an Irrevocable Life Insurance Trust (ILIT).
What Is an ILIT?
An ILIT is a trust specifically designed to own and control a life insurance policy outside of your taxable estate. When structured correctly, it allows the death benefit to pass to your beneficiaries 100% estate-tax free, even if the total value exceeds the federal exemption.
Here’s How It Works:
- You set up the ILIT and fund it with a life insurance policy.
- When you pass away, the death benefit is paid to the trust, not to your estate.
- The trust then distributes that tax-free benefit to your heirs, without increasing your taxable estate.
- This can save your family 40% or more on large estates that would otherwise be taxed.
Why It Matters Now:
The clock is ticking. If your combined estate (including home equity, business interests, retirement accounts, and life insurance) is likely to exceed $6.8 million (or $13.6 million for married couples) in 2026, you could face a steep estate tax bill.
By acting before 2026, you can:
- Lock in today’s higher exemption amounts.
- Remove life insurance from your taxable estate.
- Preserve generational wealth for your children and grandchildren.
Death Benefit Rollover: Tax-Free Legacy Building
One of the biggest advantages of an ILIT is that the life insurance proceeds can “roll over” to the next generation tax-free—meaning your family gets the full value of your policy without IRS interference.
This is especially critical for:
- Business owners
- Real estate investors
- First-generation millionaires
- Families looking to build multigenerational wealth
Don’t Wait—Start Your ILIT Plan Today
Our estate planning team helps high-net-worth families and business owners in the Southwest Suburbs set up tax-efficient strategies that protect wealth and pass it on with intention.
Schedule a consultation today to explore how an Irrevocable Life Insurance Trust can secure your legacy before the 2026 estate tax cliff.