Final answer:
In an Irrevocable Life Insurance Trust (IOLI), the beneficiaries benefit when the insured individual passes away, as they receive the insurance proceeds which are often excluded from the estate for tax purposes.
Step-by-step explanation:
When the insured dies in an Irrevocable Life Insurance Trust (IOLI), the beneficiaries of the trust are the ones who benefit. An IOLI is a legal arrangement where a trust is named as the owner of a life insurance policy. This setup is often used to exclude the insurance proceeds from the insured's estate for tax purposes, thus benefiting the trust's beneficiaries with the full amount.
Unlike a revocable trust, an irrevocable trust cannot be changed after it has been established, which means the insured cannot access the policy's cash value or change the named beneficiaries without the beneficiaries' consent. Therefore, the beneficiaries of the IOLI trust gain the financial advantages upon the insured's passing.
In an IOLI (Irrevocable Life Insurance Trust) arrangement, the trust is the owner and beneficiary of the life insurance policy. When the insured dies, the beneficiaries designated in the trust agreement will receive the death benefit.
The beneficiaries can be anyone the insured wants, such as family members, friends, or a charitable organization. The primary purpose of the IOLI is to provide financial support and security for the chosen beneficiaries after the insured's death.