What is a common reason for establishing an irrevocable life insurance trust?

The establishment of an irrevocable life insurance trust (ILIT) is commonly pursued to mitigate estate taxes upon the grantor's death. When an individual creates an ILIT, the life insurance policy is transferred to the trust, removing it from the grantor's taxable estate. This means that the death benefit from the policy will not be included in the grantor's estate value, thus potentially reducing estate taxes owed. By using an ILIT, it allows the policy proceeds to pass to the beneficiaries without being subject to the estate tax burden, ensuring that they receive the full intended value of the insurance without the erosive impact of taxation.

While other options might suggest reasons for creating a trust, they do not align with the primary purpose of establishing an ILIT. For instance, maintaining control over the policy during the grantor's lifetime contradicts the irrevocable nature of the trust, which removes that control. Additionally, while simplifying estate administration and providing immediate access to funds could be goals associated with various trusts, they are less specific to the unique benefits of an ILIT, which primarily focuses on tax mitigation.