Does a trust have an insurable interest in the life of the preneed purchaser?
A. Under ALA CODE §27-14-3(d), as amended by Ala. Act No. 2008-271, a trustee of a funeral merchandise and services trust is deemed to have a limited insurable interest in the life of a preneed contract buyer or a preneed contract beneficiary that allows for investment of trust funds in life insurance on the life of the contract buyer/beneficiary. The trustee of a cemetery merchandise and services trust is not deemed to have an insurable interest in the life of a preneed contract buyer or a preneed contract beneficiary and thus the trustee of a cemetery merchandise and services trust may not invest in a life insurance contract or annuity on that buyer/beneficiary’s life. The extent of the trustee’s insurable interest is limited to the lesser of $20,000 or 100% of the purchase price of the preneed contract. The trustee may invest any portion or all of the funds received under preneed contracts and deposited in trust in life insurance contracts or annuity contracts issued on the life of
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