Irrevocable Life Insurance Trust (ILIT) - Colorado

COLORADO IRREVOCABLE LIFE INSURANCE TRUST

Before you use this: identify the current insured and each beneficiary's relationship, transfer the initial cash, and obtain the insured's separate written consent to the actual policy and its terms before issuance. Have Colorado insurance and tax counsel confirm insurable interest and federal tax treatment.

1. Parties and present funding

Settlor and insured: [FULL LEGAL NAME AND ADDRESS]

Initial Trustee, a person other than Settlor: [FULL LEGAL NAME AND ADDRESS]

Trust name: [SETTLOR NAME] Irrevocable Life Insurance Trust

Effective date: [__/__/____]

Settlor transfers to Trustee the identified cash in Schedule A. Trustee acknowledges receipt and holds it now in trust for the persons named in Section 2. This is a present transfer; the trust does not depend on a future policy assignment. The Trustee shall keep the cash separate from personal funds and use it only for the trust's purposes. Additions require an actual transfer accepted by the Trustee.

This trust is irrevocable. Settlor has no power alone to amend, revoke, terminate, direct investments, change a policy beneficiary, borrow on or pledge a policy, or receive trust property. Settlor shall not serve as Trustee or successor Trustee. Nothing in this instrument promises that insurance proceeds will be excluded from Settlor's federal gross estate; 26 U.S.C. § 2042 addresses incidents of ownership at death.

2. Beneficiaries and policy eligibility

Primary beneficiary: [FULL LEGAL NAME], an adult [RELATIONSHIP TO INSURED].

Alternate beneficiary: [FULL LEGAL NAME], an adult [RELATIONSHIP TO INSURED].

The Trustee may apply only for a new policy on Settlor's life and only when the beneficiary relationships and intended use of proceeds satisfy C.R.S. §§ 15-5-114(2), 10-7-703, and 10-7-704. Each policy must be issued with the Trustee, acting in that capacity, as owner and beneficiary. Settlor must apply for or give separate written consent to the actual policy and its terms at or before issuance as required by C.R.S. § 10-7-707(1). Trustee shall retain the insurer's application, insured consent, issue notice, and policy with the trust records. No existing policy is assigned to this trust by this instrument.

The Trustee may pay premiums from available trust funds, keep or surrender a policy, exercise policy options in a fiduciary capacity, and collect proceeds. The Trustee shall not allow Settlor to exercise policy ownership powers. The Trustee must administer the trust in good faith for its beneficiaries and keep adequate records.

3. Administration and death distribution

During Settlor's life, the Trustee shall hold trust property to maintain the policy and pay proper trust expenses. No beneficiary has a present withdrawal right under this instrument. A requested premium contribution is effective only when transferred and accepted; this instrument does not grant a gift-tax annual exclusion or a withdrawal power.

Within sixty days after accepting office, the Trustee shall notify qualified beneficiaries of the acceptance and contact information as required by C.R.S. § 15-5-813(2)(b). The Trustee shall give the other notices and reports required by § 15-5-813, including annual and termination reports to the recipients identified there. Trustee may obtain professional assistance and use the powers allowed by C.R.S. § 15-5-815, subject to fiduciary duties.

After Settlor's death, the Trustee shall claim policy proceeds, pay proper trust expenses and liabilities, then distribute 100% of the remaining trust property:

1. To the Primary Beneficiary, if living at Settlor's death.
2. If the Primary Beneficiary is not then living, to the Alternate Beneficiary, if living at Settlor's death.
3. If neither is then living, to the probate estate of the Primary Beneficiary. This fallback does not name Settlor's estate as beneficiary of a policy or the trust.

A beneficiary's estate takes under item 3 whether the beneficiary died before or after Settlor; the Trustee shall identify the authorized personal representative before payment. This trust terminates after final distribution.

4. Trustee succession and modification

First successor Trustee: [FULL LEGAL NAME AND ADDRESS]

Second successor Trustee: [FULL LEGAL NAME AND ADDRESS]

If a Trustee dies, resigns, is removed, or otherwise leaves a vacancy, the first willing named successor shall accept in writing and take custody of trust property and records; the second serves if the first does not. Neither successor may be Settlor. If neither serves, the vacancy is filled under C.R.S. § 15-5-704(3), including unanimous agreement of the qualified beneficiaries or court appointment where applicable. A resigning Trustee shall give the notice required by C.R.S. § 15-5-705(1).

Settlor cannot amend or terminate this trust unilaterally. Any consensual modification or termination must meet C.R.S. § 15-5-411, including the required beneficiary consents and court findings, or another applicable lawful procedure.

5. Accountability and tax records

A Trustee who breaches a duty remains subject to remedies under C.R.S. § 15-5-1001. This instrument does not excuse bad faith or reckless indifference, impose a cure period before suit, or cap liability at the value of trust assets. Responsibility for a disclosed fiduciary contract and other third-party claims is governed by C.R.S. § 15-5-1010 and the facts of the claim. No party receives an automatic fee award or a mandatory arbitration right under this trust.

The Trustee shall give the Settlor, the Settlor's executor, and retained tax counsel reasonable records needed for estate, gift, and generation-skipping transfer tax review. Federal law taxes qualifying generation-skipping transfers under 26 U.S.C. § 2601, and § 2631 concerns exemption allocation by the transferor or executor. This trust makes no GST allocation and guarantees no estate, gift, or GST tax outcome.

6. Signatures

Settlor transfers the Schedule A cash and acknowledges the trust is irrevocable.

Settlor and insured: ______________________________ Date: [__/__/____]

Printed name: [SETTLOR FULL LEGAL NAME]

Trustee accepts the cash and the trusteeship.

Trustee: _______________________________________ Date: [__/__/____]

Printed name: [TRUSTEE FULL LEGAL NAME]

First successor acceptance, when serving: ______________________________ Date: [__/__/____]

Second successor acceptance, when serving: _____________________________ Date: [__/__/____]

Schedule A. Initial trust property and policy record

Initial cash transferred and received now: $[AMOUNT] in [SPECIFIC ACCOUNT OR IDENTIFIABLE FORM], on [__/__/____].

Future policy, after insurer issuance: Insurer [NAME]; policy number [NUMBER]; issue date [__/__/____]; face amount $[AMOUNT]; owner and beneficiary [TRUSTEE NAME], Trustee of this Trust. Attach insurer confirmation and the insured's signed application or consent to the issued policy terms. A blank policy record does not transfer a policy.

Sources and References

• Colorado Revised Statutes 2026, Title 15
• Colorado Revised Statutes 2026, Title 10
• U.S. Code, 26 U.S.C. § 2042