Lately, I’ve been thinking more about estate planning. Part of it is just getting older. Part of it is having young children I want to protect no matter what. And part of it is watching the unsettling rise in political violence, which is a stark reminder that life can be cut short unexpectedly.

As I inch closer to death, I can’t help but wonder about estate tax planning and the potentially massive tax bill my family might face if we’re extremely fortunate. To get ahead of it, I started digging into how an irrevocable life insurance trust (ILIT) could help families save big on the so-called death tax.

Picture this fortunate estate scenario:

A couple in their 90s, let’s call them the Yamamotos, spent their whole lives saving and investing. They built a thriving small business in Honolulu, bought a few rental properties, and squirreled away some stocks that did surprisingly well over the decades. By the time they’re both gone, their estate is worth about $50 million.

Building multi-generational wealth sounds like the dream, right? Except there’s a nightmare twist: the IRS shows up with a 40% estate tax bill on everything above the exemption amount, which in 2025 is $13.99 million per individual, or $27.98 million for a married couple.

That means the Yamamotos’ estate owes roughly $8.8 million in taxes (40% of $22.02 million, the amount over the estate tax threshold for two people).

And here’s the problem: most of the Yamamotos’ wealth is tied up in their business and properties. The estate doesn’t have $9 million in liquid cash sitting around. To cover the bill, the executor may be forced into a fire sale, dumping assets below market value just to raise cash. Years of careful building and family legacy can get ripped apart in one swoop.

But there’s a better way. Instead of scrambling to liquidate assets under pressure, families can use life insurance to pay the bill. And not just any life insurance policy, but one wrapped neatly inside something called an Irrevocable Life Insurance Trust (ILIT).

Let me explain why this is one of the most underappreciated estate planning moves the wealthy can make.

The Magic of the Irrevocable Life Insurance Trust (ILIT)

Here’s the financial strategy: Instead of owning a life insurance policy in your own name, you create an ILIT and have the trust own the policy. When you pass away, the ILIT – not your estate – collects the tax-free death benefit. The ILIT can then provide liquidity to cover estate taxes or distribute what’s left to your heirs exactly as you instructed.

Why is this so powerful? Because any payout that goes into the ILIT is not counted as part of your taxable estate. Even if you have a giant estate and a giant life insurance payout, the IRS doesn’t get to double dip.

Let’s run some numbers:

Suppose our friend Mr. Yamamoto has a $10 million life insurance policy inside an ILIT. If he owned that policy himself, the payout would push his taxable estate up another $10 million. That’s another $4 million evaporating into taxes ($10 million X 40% death tax).

But with the ILIT in place? That same $10 million policy gets funneled into the trust, outside the IRS’s reach, and can be used to give the estate the liquidity it needs to pay the tax bill. The family keeps their real estate, their business, their investments, and avoids a panic fire sale. That’s a massive win.

An ILIT succeeds in removing the insurance from the estate. It does not deprive anybody of access to anything.

Flexibility: Beneficiaries, Trustees, and Even “Special Friends”

One of the great things about ILITs is flexibility. You can choose almost anyone as the beneficiary: kids, grandkids, business partners, even lifelong friends.

Historically, ILITs were also a discreet way to provide for unmarried partners or, let’s be honest, “special friends” outside of marriage. If an individual had a special friend they wanted to benefit for always being there for them physically and emotionally when their spouse was not, life insurance inside the trust was one way you could take care of that obligation.

Scandalous? Maybe. Practical? Definitely.

On a more traditional note, ILITs also let you add structure. Don’t want your grandkids blowing their inheritance on Bentleys and TikTok influencer gear? Fine. You can direct the trustee to release money only for college tuition or a down payment on a home.

You can also protect heirs from creditors, divorce disputes, and even their own bad decisions. Trust and life insurance laws are strong in most states, and combined together, they form a kind of legal shield.

Think of it as “money with seatbelts.”

How an ILIT Actually Works

The setup has to be precise to pass IRS scrutiny. That’s why you should speak to an estate planning lawyer to help you set it up. Here’s the playbook:

1. Create the ILIT – You (the grantor) set up the trust and name a trustee. This has to be “irrevocable” — meaning once it’s done, you can’t pull the money back out for yourself. A revocable living trust is one you can change.
2. ILIT Buys the Policy – Instead of you buying the life insurance policy, the trust buys and owns it. You fund the trust with cash so it can pay the premiums. Important: Don’t transfer an existing policy into the trust unless you’re sure you’ll live at least three more years. Otherwise, the IRS will pull it back into your taxable estate.
3. Notify Beneficiaries (Crummey Notices) – When you put money into the trust, beneficiaries technically have the right to withdraw it. The trustee has to send out “Crummey notices” (named after a taxpayer with great timing and a funny last name). Beneficiaries usually don’t take the money out, but the IRS requires this step for the trust to remain legit.
4. Trust Pays Premiums – After the notice period passes (usually 30–60 days), the trustee uses the cash to pay the policy premiums.
5. Death Benefit Provides Liquidity – When you pass away, the ILIT collects the death benefit. The trustee can then decide how to use the funds: provide liquidity to the estate to cover taxes, support heirs, or both.

For example, the ILIT might name your spouse as the primary beneficiary and your kids as secondary beneficiaries. That way, your spouse is taken care of, and whatever’s left passes to your children free of estate tax when your spouse later passes. Smart layering.

Pitfalls and Cautionary Tales

Like most good things in finance, ILITs come with caveats:

• Forget the Crummey notices and you’re toast. One lawyer recalled a client who tried to backdate notices using a laser printer, except the notices predated the invention of laser printers. The IRS wasn’t impressed. Result: the ILIT was voided, and the assets were dragged back into the taxable estate. Ouch.
• Watch out for oversized policies. Don’t let a life insurance salesman talk you into $40 million of coverage if your estate plan shows you only need $10 million. Permanent life insurance is expensive, and excess premiums can drain your liquidity.
• ILITs work best with permanent life insurance. Term life policies usually expire before estate taxes are due. But permanent policies (whole, universal, etc.) cost a hefty amount in premiums. You’ve got to weigh whether the coverage is worth it.
• Tax laws change. Today’s $13.99 million per-person exemption might not last, despite the passage of The One Big Beautiful Bill Act on July 4, 2025. If the exemption falls back to ~$5 million, many more families will be affected. Still, if your net worth is likely to grow, planning ahead with an ILIT can make sense.
• No take-backs. Once you lock money into an ILIT, it’s gone for good. Some families regret setting one up when times get tough later. Or perhaps you decide to aggressively decumulate wealth by YOLOing and giving enough away to charity that you end up way under the estate tax threshold when you die.

An ILIT Is Like A Pressure Release Valve

Estate taxes are often called the “rich person’s problem.” But here’s the reality: real estate appreciation, stock market gains, and business success can push families into taxable territory faster than they expect.

For the Yamamotos, sitting on a $50 million estate, the IRS’s cut is nearly $9 million. An ILIT is like a pressure valve. It takes the uncertainty and panic out of the equation by ensuring there’s cash available to pay Uncle Sam without dismantling the family legacy.

Is it perfect? No. It requires discipline, planning, and often some hefty life insurance premiums. But for families who want to avoid a forced fire sale and keep their wealth intact across generations, it’s one of the most practical estate planning tools out there.

As with all things money, the earlier you plan, the more options you have. Don’t wait until you’re 78 with your estate executor staring down the barrel of a multimillion-dollar tax bill. Talk to an estate attorney, run the numbers, and see if an ILIT fits into your plan.

Because if you don’t, the IRS might end up as your biggest heir, and they don’t even send thank-you notes.

Readers, do any of you have an ILIT set up inside an irrevocable trust? If so, how easy was it to create, and do you think it’ll be worth it? If you’re considering one, definitely consult an estate planning attorney, as I’m not one. At a minimum, make sure you’ve got a death file, a revocable living trust, or at least a will. Since death is inevitable, it’s on us to plan ahead so our heirs aren’t left scrambling once we’re gone.

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Since 2022, commercial real estate (CRE) investors have been slogging through a rough downturn. Mortgage rates spiked as inflation ripped higher, cap rates expanded, and asset values fell across the board. The rally cry became simple: “Survive until 2025.”

Now that we’re in the back half of 2025, it seems like the worst is finally over. The commercial real estate recession looks to be ending and opportunity is knocking again.

I’m confident the next three years in CRE will be better than the last. And if I’m wrong, I’ll simply lose money or make less than expected. That’s the price we pay as investors in risk assets.

A Rough Few Years for Commercial Real Estate

In 2022, when the Fed embarked on its most aggressive rate-hiking cycle in decades, CRE was one of the first casualties. Property values are incredibly sensitive to borrowing costs because most deals are financed. As the 10-year Treasury yield climbed from ~1.5% pre-pandemic (low of 0.6%) to ~5% at the 2023 peak, cap rates had nowhere to go but up.

Meanwhile, demand for office space cratered as hybrid and remote work stuck around. Apartment developers faced rising construction costs and slower rent growth. Industrial, once the darling of CRE, cooled as supply chains froze and then normalized.

With financing costs up and NOI growth flatlining, CRE investors had to hunker down. Headlines about defaults, extensions, and “extend and pretend” loans dominated the space.

Signs the Commercial Real Estate Recession Is Ending

Fast-forward to today, and the landscape looks very different. Here’s why I believe we’re at the end of the CRE downturn:

1. Inflation Has Normalized

Inflation has cooled from a scorching ~9% in mid-2022 to under 3% today. Lower inflation gives the Fed cover to ease policy and investors more confidence in underwriting long-term deals. Price stability is oxygen for commercial real estate, and it’s finally back.

2. The 10-Year Yield Is Down

The 10-year Treasury, which drives most mortgage rates, has fallen from ~5% at its peak to ~4% today. That 100 bps drop is meaningful for leveraged investors. A 1% lower borrowing cost can translate into 10%+ higher property values using common cap rate math.

If the 10-year Treasury bond yield can get to 3.5% and the average 30-year fixed rate mortgage can get to 5.5%, I expect to see a large uptick in real estate demand. We’re not that far away, especially if the Fed cuts by 100 basis points (1%) over the next year.

3. The Fed Has Pivoted

After more than nine months of holding steady, the Fed is cutting again. While the Fed doesn’t directly control long-term mortgage rates, cuts on the short end generally filter through. The psychological shift is also important: investors now believe the tightening cycle is truly behind us.

The below chart indicates about six Fed rate cuts until the end of 2026, totaling ~1.5%. Such market expectations will change over time, but this is where we’re at right now.

4. Distress Is Peaking

We’ve already seen the forced sellers, the loan extensions, and the markdowns. Many of the weak hands have been flushed out. Distress sales, once a sign of pain, are starting to attract opportunistic capital. Historically, that transition marks the bottom of a real estate cycle.

5. Capital Is Returning

After two years of sitting on the sidelines, capital is coming back. Institutional investors are underweight real estate relative to their long-term targets. Family offices, private equity, and platforms like Fundrise are actively raising and deploying money into CRE again. Liquidity creates price stability.

Where the Opportunities Are In CRE

Not all CRE is created equal. While office may be impaired for years, other property types look compelling:

• Multifamily: Rent growth slowed but didn’t collapse. With little-to-no supply of new construction since 2022, there will likely be undersupply over the next three years, and upward rent pressures.
• Industrial: Warehousing and logistics remain long-term winners, even if growth cooled from the pandemic frenzy.
• Retail: The “retail apocalypse” was overstated. Well-located grocery-anchored centers are performing, and experiential retail has staying power.
• Specialty: Data centers, senior housing, and medical office continue to attract niche capital. With the AI boom, data centers is likely to see the most amount of CRE investment capital.

As a capital allocator, I’m drawn to relative value. Stocks trade at ~23X forward earnings today, while many CRE assets are still priced as if rates are permanently at 2023 levels. That’s a disconnect worth paying attention to.

Don’t Confuse Commercial Real Estate With Your Home

One important distinction: commercial real estate is not the same as your primary residence. CRE investors are hyper-focused on yields, cap rates, and financing. Homebuyers, on the other hand, are more focused on lifestyle and utility. As a result, the rise in interest rates tend to have less of a negative impact in residential home prices.

For example, I bought a new home in 2023 not to maximize financial returns, but because I wanted more land and enclosed outdoor space for my kids while they’re still young. The ROI on peace of mind and childhood memories is immeasurable.

Commercial real estate, by contrast, is about numbers. It’s about cash flow, leverage, and exit multiples. Yes, emotions creep in, but the market is far more ruthless.

Risks Still Remain In CRE

Let’s be clear: calling the end of a recession doesn’t mean blue skies forever. Risks remain:

• Office glut: Many CBD office towers are functionally obsolete and may never recover.
• Debt maturities: There’s a wall of loans still coming due in 2026–2027, which could test the market again.
• Policy risk: Tax changes, zoning laws, or another unexpected inflation flare-up could derail progress.
• Global uncertainty: Geopolitical tensions and slowing growth abroad could spill into CRE demand.

But cycles don’t end with all risks gone. They end when the balance of risks and rewards shifts in favor of investors willing to look ahead.

Why I’m Optimistic About CRE

Roughly 40% of my net worth is in real estate, with ~10% of that in commercial properties. So I’ve felt this downturn personally.

But when I zoom out, I see echoes of past cycles:

• Panic selling followed by opportunity buying.
• Rates peaking and starting to decline.
• Institutions moving from defense back to offense.

I recently recorded a podcast with Ben Miller, the CEO of Fundrise, who’s optimistic about CRE over the next three years. His perspective, combined with the improving macro backdrop, gives me confidence that we’ve turned the corner.

CRE: From Survive to Thrive

For three years, the mantra was “survive until 2025.” Well, here we are. CRE investors who held on may finally be rewarded. Inflation is down, rates are easing, capital is flowing back, and new opportunities are emerging.

The end of the commercial real estate recession doesn’t mean easy money or a straight-line rebound. Unlike stocks, which move like a speedboat, real estate moves more like a supertanker – it takes time to turn. Patience remains essential. Still, the tide has shifted, and this is the moment to reposition portfolios, acquire at attractive valuations, and prepare for the next upcycle.

The key is to stay selective, keep a long-term mindset, and align every investment with your goals. For me, commercial real estate remains a smaller, but still meaningful, part of a diversified net worth.

If you’ve been waiting on the sidelines, it might be time to wade back in. Because in investing, the best opportunities rarely appear when the waters are calm—they show up when the cycle is quietly turning.

Readers, do you think the CRE market has finally turned the corner? Why or why not? And where do you see the most compelling opportunities in commercial real estate at this stage of the cycle?

Invest In CRE In A Diversified Way

If you’re looking to gain exposure to commercial real estate, take a look at Fundrise. Founded in 2012, Fundrise now manages over $3 billion for 380,000+ investors. Their focus is on residential-oriented commercial real estate in lower-cost markets. Throughout the downturn, Fundrise continued deploying capital to capture opportunities at lower valuations. Now, as the CRE cycle turns, they’re well-positioned to benefit from the rebound.

The minimum investment is just $10, making it easy to dollar-cost average over time. I’ve personally invested six figures into Fundrise’s CRE offerings, and I appreciate that their long-term approach aligns with my own. Fundrise has also been a long-time sponsor of Financial Samurai, which speaks to our shared investment philosophy.

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