Question 1: Can I put something other than life insurance in an Irrevocable Life Insurance Trust (or “ILIT”)?

Answer 1: Yes, any asset can be placed in an ILIT, though life insurance is the most common asset placed in this type of trust. One of the ways to fund an ILIT is to place an income producing asset in the ILIT to provide a stream of income from which to pay the premiums on the life insurance. The benefit of doing so is to eliminate or at least reduce the amount of gifts to the ILIT for the purpose of paying the life insurance premiums.

Question 2: What if I want access to the cash value of the ILIT?

Answer 2: As a general rule, the settlor cannot directly access the cash value of an insurance policy held by the ILIT. However, if the trust instrument permits borrowing from the trust, the settlor can borrow funds so long as interest is paid at a market rate and the loan is repaid over time. Furthermore, the beneficiaries of the trust (e.g., spouse and children) could access the cash value through the Trustee for the needs of the beneficiaries.