Life insurance can be helpful in managing taxes. If you’ve accumulated enough wealth that you expect your estate to be taxed at either the state or federal level, using life insurance in a trust is beneficial. At the present time, you can pass $11.18 million to your heirs without paying any federal estate tax. Life insurance allows families to provide funding to cover estate taxes and provides other opportunities to protect wealth. An irrevocable life insurance trust, known as an ILIT, is an advanced planning technique, and a great way to provide a source of ready cash. Available funds can be used to pay estate taxes on a property or business, and allows wealth to transfer to your heirs outside your estate. Without this source of funds, heirs may be forced to sell off real estate, stocks, family jewelry or a family business, simply to raise sufficient cash to cover estate costs. Bad timing, such as a declining stock market or depressed real estate values could lead to the liquidation of assets at a low value. A major advantage of an irrevocable life insurance trust is that the assets included in the trust are not considered part of your estate for federal/estate tax purposes. The heirs aren’t expected to pay estate or inheritance taxes on the life insurance death benefits that are paid. While an irrevocable life insurance trust provides numerous tax advantages, it is a complex legal arrangement. Setting up an ILIT requires professional assistance, and there’s costs involved with creating and maintaining the trust. Once the trust is set up, you can’t change it, withdraw any of the assets or even terminate it.