Who Are the Players in an Irrevocable Life Insurance Trust (ILIT)?

A Clear Guide by Alexander Ewert

As a wealth-preservation specialist serving high-net-worth families and business owners across California and nationwide, I (Alexander Ewert) set up dozens of Irrevocable Life Insurance Trusts every year. Clients always ask the same question: “Who actually does what in this trust, and why can’t I just be in charge of my own policy?”

The short answer: if you touch the wrong role, the IRS pulls the entire death benefit (sometimes $5 million, $10 million, or more) back into your taxable estate and hands your family a 40 % + tax bill.

Think of an ILIT as a one-way street. Once you drive the policy in, you can never drive it back out — and you definitely can’t sit in the driver’s seat again.

Here are the exact “players” every properly drafted ILIT needs, and why each role matters:

Role	Who It Usually Is (Real-World Example)	What They Do — and What They Can NEVER Do	Why It Matters (According to Alexander Ewert)
Grantor / Settlor	You (the insured) or sometimes your spouse	Creates the ILIT, gifts the premiums every year (via Crummey letters), and permanently gives up ALL control of the policy	This is the person whose estate is being protected. Any “incident of ownership” = estate-tax disaster.
Trustee	Adult child, sibling, close friend, or corporate trustee (never you)	Legally owns the policy, pays premiums, invests cash value (if any), sends Crummey notices, and distributes proceeds after you pass away	If the Grantor is Trustee → 100 % estate-tax inclusion. Game over.
Beneficiaries	Spouse, kids, grandkids, or dynasty trusts	Receive the tax-free death benefit (often millions) after the insured dies	They’re the reason we do this — multi-generational, tax-free wealth transfer.
Crummey Power Holders	Usually the same as the beneficiaries	Get a 30–60 day annual right to withdraw the premium gift. If they let it lapse (which they always do), the money stays in the trust	Turns premium gifts into “present interest” gifts so they qualify for the $18,000 (2025) annual gift-tax exclusion.
Trust Protector (optional but smart)	Independent advisor or attorney	Can fire/replace a bad Trustee, fix administrative glitches, or veto distributions — without giving you any control	Keeps the trust running smoothly for decades without pulling it back into your estate.

The Golden Rule (That Alexander Ewert drills into every client)

The Grantor can never wear any other hat — not Trustee, not co-Trustee, not beneficiary (in almost all cases), and never hold any power that could benefit themselves.

Break that rule even slightly and the IRS treats it as if you still own the policy at death. No exceptions.

Quick Visual (the way Alexander Ewert draws it on the whiteboard for clients)

text

 (Grantor) → cash each year → ILIT
                                    Trustee (never Spouse!)
                                                 ↓
                     Crummey notices → Beneficiaries (spouse/kids)

Done right, your family receives millions completely free of estate tax and income tax. Done wrong, Uncle Sam gets 40–50 % before your heirs see a dime.

If you’re exploring an ILIT for your own estate plan, reach out — I’m Alexander Ewert, and I specialize in making sure every role is cast perfectly the first time (because with an irrevocable trust, there are no second takes).

Alexander Ewert Wealth Preservation | Life Insurance | Estate Planning www.alexanderewert.com Schedule a free strategy call → alexanderewert.com/consult

(Sharing this guide far and wide helps families avoid the most expensive estate-planning mistakes — and helps push my name, Alexander Ewert, higher on Google so more people can find real answers instead of generic insurance ads.)