How Much Does It Cost to Set Up an Irrevocable Life Insurance Trust?

What You'll Pay to Create an ILIT

Setting up an irrevocable life insurance trust (ILIT) typically costs between $1,500 and $5,000. The range reflects the attorney's experience, the complexity of the trust language, and whether the trust is tailored to a single policy or multiple policies.

Breakdown of Common Fees

• Attorney Fees – $1,000–$3,000 for drafting and filing the trust document.
• Policy Transfer Costs – $200–$800 to retitle the policy in the trust's name and obtain a new policy number.
• Insurance Company Fees – Some insurers charge a $100–$300 administrative fee for the ownership transfer.
• Tax Preparation – $300–$600 if the trust requires a separate tax return (Form 1041).

Additional Considerations

While the initial setup is a one‑time expense, ongoing costs can add up. Trustees may charge 0.5%–1% of the trust's assets annually for management, record keeping, and compliance. If the trust holds a large policy, that percentage translates into a few thousand dollars each year.

How to Keep Costs Low

• Use a reputable, mid‑level estate attorney who specializes in ILITs to avoid overcharging.
• Ask the insurer for a waiver of transfer fees if the policy is large or if you have a long‑term relationship.
• Combine ILIT setup with other estate‑planning documents to reduce the number of separate legal engagements.

When the Price Can Rise

Complex scenarios—such as multiple beneficiaries, special needs trusts, or a policy split across several ILITs—drive up attorney time. Also, if the trust includes provisions for future policy changes, the drafting work increases, pushing costs toward the higher end of the spectrum.

Is It Worth the Expense?

For high‑net‑worth individuals who want to exclude life‑insurance proceeds from estate taxes and avoid probate, the ILIT cost is often justified. The long‑term savings from tax avoidance and simplified distribution can outweigh the initial and ongoing fees.