Cheers to summer, and planning for what comes next

By Justin Champlain

Cheers to summer! Cold drinks by the water, fireworks in the sky, long days, and beautiful sunsets.

New England winters can feel long and dark, and summer always seems to fly by, but it is, without a doubt, my favorite time of year. Many clients over the years have shared this same sentiment, and we’ve spent meaningful time talking about their family camps, cottages, and compounds, with family being the common thread throughout.

For many, that means time spent on the lakes of New Hampshire or Maine, along the North Shore beaches, or down on Cape Cod. These places hold more than just real estate value. They hold memories, traditions, and a sense of connection across generations. At some point, though, clients begin to recognize they won’t be around forever to enjoy these special places, yet they deeply want the moments and the magic to continue.

That realization opens the door to a number of important planning questions. What is the ultimate goal for the property? Do children and grandchildren even want to keep it? What is the financial capacity of the next generation? Will there be enough in the estate to cover ongoing expenses like property taxes, insurance, and maintenance? Should the property be rented, shared, or eventually sold? What if not everyone lives nearby or uses it equally? And perhaps the toughest question of all: what’s fair?

While there’s rarely a one-size-fits-all answer, if the goal is to keep a property in the family, one strategy that can be particularly powerful is an Irrevocable Life Insurance Trust (ILIT).

So, what is an ILIT?

Full disclosure, I’m not an attorney, so proper legal guidance is essential. But at a high level, an ILIT is a trust specifically designed to own a life insurance policy. Because the trust (not the individual) owns the policy, the death benefit is generally kept outside of the insured’s taxable estate.

This can be especially important in states like Massachusetts and Maine, which have state-level estate taxes with relatively low exemption thresholds (currently around $2 million and $7.16 million, respectively). Keeping life insurance proceeds outside the estate can help preserve more wealth for heirs.

It’s also important to understand that an ILIT is irrevocable—once it’s established, it generally cannot be changed or undone. That makes proper planning upfront critical.

Why ILITs can work well for family properties

ILITs can be particularly valuable when heirs inherit illiquid assets, like real estate or a family business. Without sufficient liquidity, families can feel pressure to sell these assets simply to cover expenses or taxes.

In the context of a vacation home, the life insurance proceeds inside an ILIT can be used to:

• Cover ongoing expenses (property taxes, insurance, maintenance)
• Create a reserve fund for future repairs or capital improvements
• Provide liquidity for a buyout if one heir wants out
• Help equalize inheritances among beneficiaries

Instead of children or grandchildren scrambling to fund these costs or disagreeing on what to do the ILIT creates a structured and intentional funding source. The trust itself can also include rules around how funds are used, helping ensure the property is maintained and enjoyed as intended.

How ILITs are funded

ILITs are most commonly funded through ongoing annual gifts, which the trust then uses to pay life insurance premiums. These contributions are often structured to take advantage of the annual gift tax exclusion.

In some cases, an existing life insurance policy can be transferred into the ILIT. However, it’s important to be mindful of the look-back rules. Because this strategy relies on life insurance, timing certainly matters. Planning earlier, when individuals are younger and healthier, typically makes it easier and more cost-effective to obtain coverage.

Final thoughts

At its core, an ILIT is a way to create tax-efficient, controlled legacy, especially for goals like keeping a cherished family property intact across generations.

So, as you sit back this summer with a glass of wine overlooking the water, it may be worth asking: What do I want this place to mean for my family long after I’m gone?

If preserving that legacy is important, consider discussing strategies like this with your financial advisor, tax professional, and estate planning attorney to determine what might fit best within your overall plan.

Justin is a Certified Financial Planner CFP® and Enrolled Agent (EA) and is the owner and financial planner of Champlain Financial Planning. Justin lives in Merrimac, Massachusetts, with his wife, son, dog, and horses.