Without an ILIT, a life-insurance death benefit is included in the insured's estate for federal estate-tax purposes. Move the policy into an ILIT (with careful "Crummey" compliance for premium gifts) and the benefit can pass to heirs free of estate tax.
Glossary · trusts
Irrevocable Life Insurance Trust
Acronym: ILIT
In plain English
An irrevocable trust that owns a life-insurance policy so the death benefit is kept out of your taxable estate.