By now, most of our readers know that planning for your final days and what will happen in the days and months following your death is of vital importance. If you have a life insurance policy, you probably already know that you shouldn't include that policy in you will because a beneficiary is listed on the policy. But, did you know that you can set up an irrevocable life insurance trust for the policy?

An ILIT can help out with tax liability issues. By placing the life insurance policy in an ILIT, you are reducing the size of your estate. That will reduce the size of the estate tax liability. It can also protect the proceeds of the policy from creditors.

When you think about a life insurance policy, you should realize that the payout is considerable. The payout occurs all at once right after you die. That might not be what you want to happen because it can cause considerable issues for the beneficiary. In some cases, even the most responsible adult will feel overwhelmed by getting that money all at once.

Setting up an ILIT enables you to control when and how the beneficiaries will get funds. You can even set up the trust so that the person would get specified amounts when certain life events occur. You are in total control of the disbursement of the funds.

Finally, an ILIT might help to protect a beneficiary's Medicaid eligibility. If you are interested in this aspect of an ILIT, make sure you get answers to any questions you have so that you can decide how to proceed with the ILIT.

Source: FindLaw, “The Irrevocable Life Insurance Trust,” accessed July 09, 2015