Funding an irrevocable trust with permanent life insurance can be a very tax-efficient way to transfer wealth to heirs. During the insured’s lifetime, increases in the cash value of a life insurance policy are not subject to income tax. When the insured dies, the life insurance pays out a death benefit that can be a multiple of the amount paid in premiums. This death benefit is not subject to income tax when received. With a life insurance trust that is properly structured and properly administered, the death benefit will also not be subject to estate tax at the insured’s death. Accordingly, by holding life insurance through an irrevocable trust, you can transfer significant assets to heirs entirely free of both income and estate tax.