ILIT Calculator 2026 β Irrevocable Life Insurance Trust Estate Tax Savings
Calculate estate tax savings from an ILIT, Crummey gift funding, annual premium coverage, and compare ILIT vs direct insurance. 2026 $15M exemption and $19K annual exclusion.
ILIT Analysis Breakdown
Crummey Gift Funding Plan
How an ILIT Works
Without an ILIT, a life insurance policy owned by the insured is included in the taxable estate. With an ILIT, the trust β not you β owns the policy. Proceeds paid to the trust are outside your estate and pass to beneficiaries free of estate tax.
Estate Tax Formula
Estate Tax = max(0, Taxable Estate − Exemption) × 40%
With ILIT: Taxable Estate = Estate Value only
Estate Tax = max(0, Estate Value − Exemption) × 40%
ILIT Savings = Tax Without ILIT − Tax With ILIT
Annual Gift Capacity = Crummey Beneficiaries × $19,000
Example: $20M estate, $5M policy, married
Taxable estate: $20M + $5M = $25M
Exemption (married, no portability): $15M
Estate tax: ($25M − $15M) × 40% = $4,000,000
With ILIT:
Taxable estate: $20M
Exemption: $15M
Estate tax: ($20M − $15M) × 40% = $2,000,000
ILIT saves: $4M − $2M = $2,000,000 in estate taxes
ILIT vs Direct Insurance & Second-to-Die Analysis
Compare keeping policy in estate, ILIT, and second-to-die policy for maximum estate planning efficiency
Three approaches to life insurance in estate planning. ILIT is optimal for estates above the exemption amount.
| Approach | Proceeds in Estate? | Estate Tax | Net to Heirs | Annual Cost to Fund |
|---|
Key ILIT Setup Requirements
| Requirement | Details |
|---|---|
| Trust must be irrevocable | Cannot be changed or revoked β plan carefully before establishing |
| Apply for policy through ILIT | Avoid 3-year lookback by not transferring an existing policy |
| Crummey notices required | Send written notice to all beneficiaries within 30 days of each contribution |
| Separate trust bank account | Premiums gifted to trust, trustee pays insurer directly |
| Trustee must be independent | Grantor cannot be trustee; often an adult child or corporate trustee |
Second-to-die (survivorship) policies pay only after both spouses die β matching the timing of estate tax liability. They are typically 30β40% cheaper than individual policies of the same face value.
| Metric | Individual Policy (ILIT) | Second-to-Die (ILIT) |
|---|
Second-to-die premiums estimated at 65% of individual policy premium cost. Actual premiums depend on both insured parties' ages and health. For married couples with taxable estates, second-to-die is often the most cost-effective ILIT strategy.