Irrevocable Life insurance Trust "ILIT"

Irrevocable Life Insurance Trusts

Purposes:

Prevents creditors of the beneficiary from intercepting the life insurance proceeds
Prevents a bankruptcy trustee from intercepting the life insurance proceeds
Prevents a very large lump sum of money meant for the benefit of your children from being wasted by someone who is financially undisciplined or financially irresponsible

The Trust becomes the owner and the beneficiary of your life insurance policy.

At your death, the insurance company writes a check to your Trustee who deposits the life insurance proceeds into the Trust checking account.

The Trustee then pays out the life insurance proceeds in the manner you have prescribed in the Trust Declaration for the benefit of your children.

Common objections:

"I trust my ex-spouse to do the right thing." Sure you do. Actually maybe you do, but what happens if your ex-spouse is sued for ANY reason and has a judgment against everything your ex owns? The judgment creditor will get the life insurance proceeds when you die.
"The government will make my ex spend the money appropriately." There is no governmental agency, to include the courts, that will monitor how your ex spends the money.
"My Executor will make sure that the life insurance money is spent for the benefit of my children." Life insurance is a non-probate asset and your Executor will have no ability to control how your ex-spouse spends the life insurance proceeds.