An irrevocable life insurance trust, called an ILIT, is a special type of whole life insurance policy with a trust set up as the beneficiary. The trust can either be a specified executor, as in the executor of the estate, or it can be a person or institution. The key is that by setting up the policy with a trust as the owner, you can separate the value of the policy from the remainder of your estate, preventing people who you do not want to have access to the proceeds of the policy from accessing them.
Another advantage of an ILIT is that it prevents your life insurance policy from being included in your estate and taxed accordingly. Instead of being part of your estate, an ILIT is a separate financial contract. The named beneficiaries in the policy can also inherit from the remainder of your estate, but the proceeds of the ILIT cannot be attached or redirected into other uses without the express consent of the policy owner.
Changing the named beneficiaries on your policy will generally serve to remove your ex from eligibility for the proceeds, except where minor children are concerned. Since a minor child cannot receive a legal inheritance, using an ILIT places the money into a trust where it can be administered, either in small parts on a regular basis or held as a lump sum until the named beneficiary is old enough to receive the benefits personally.
Whether or not you set up an ILIT depends on many factors, including the amount of financial and legal pressure you are under from your ex. Remember, you have the option of naming specific people or procedures for administering your life insurance benefits, and that means you can name an executor who will adhere to your wishes in how the funds are to be distributed. An ILIT is a safe way to accomplish this without getting others involved, but the overall cost of the policy may be somewhat higher than a traditional policy because of the additionally handing and processing involved.