Irrevocable Life Insurance Trusts & Intentionally Defective Grantor Trusts

If you have access to the underwriting comapny for the ILIT, call th H.O. and speak to their advanced sales consultants. They are typically estate planning and tax attorneys who work solely with these issues. I understand you may be in the same field, but utilizing their expertise will likely save you time and $.

Thanks - the situation I am researching is an interesting situation.

IRC 677(a)(3) states that the grantor will be treated as taxed on the income used to produce the premiums, so long as the person holding the power to direct such premium payments is the grantor or a non-adverse party (such as the trustee). However, in this situation, the trustee (who hold such power) is the beneficiary of the trust, which would make him/her an adverse party ---> the ILIT is not a IDGT through this power.

Do you agree with this conclusion?

My understanding is that being an adverse party trumps being non-adverse, so it seems the trust would not be treated as a grantor trust to the trustor. The trustee however appears to be the person who would be treated as the grantor for income tax purposes. In effect the original trustor made a gift in trust for the benefit of the trustee. Given his power to determine the use of the trust income as well as the benefits therof, it seems only fair to treat the trustee as the grantor (or owner) of the trust for income tax purposes.

Glad you learned something.
I try to understand PB's posts and it always teaches me something I didn't know, but then there is soo much I don't.