If you read my previous, you know that the cash value of life insurance may not be protected from creditors in Michigan – it is still questionable.  As a Michigan estate planning attorney, I’ve seen the disappointment on some faces when I explain the current state of affairs.  Then they ask the logical question . . . “well, is there any way that I can protect it for sure?”

The answer is yes!  Although there may be other ways, one good way to protect the cash value of life insurance in Michigan is by having the insurance in an Irrevocable Life Insurance Trust – many times referred to as an ILIT.

In simple terms, an ILIT is an irrevocable trust that is the owner of one or more life insurance policies.  Although it may go without saying, because it is irrevocable it cannot be revoked or amended.  A an additional key component is that the person whose life is insured cannot retain any “incidents of ownership.”  Although not comprehensive, a good overview of “incidents of ownership” can be found here.  Because you do not “own” the insurance, it is not available to creditors . . . that is what protects it.

Please note that an ILIT is an advanced estate planning technique and is rather intricate in its creation and operation.  Run, don’t walk, away from any attorney who say they are “simple” or a “piece of cake”, or those that don’t ask you very many questions before drafting it.

What you read above is an enormous simplification of how ILITs work.  Do NOT try to draft or implement an ILIT on your own.  Make sure to work with a dedicated estate planning attorney that is familiar with ILITs and their intricacies.  Otherwise you will spend your money on something that won’t do much for you.

Call us at 616-827-7596 to determine if an ILIT can protect the cash value of your life insurance.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™.  This goes beyond merely planning for finances – it’s about who your are and what’s important to you.  He focuses on estate and asset protection planning for  the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning.  He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.