What is a life insurance trust and why should I consider establishing one?
A life insurance trust is a trust that has the power to purchase life insurance policies on the person who establishes the trust (the grantor), the grantor’s spouse, or the trust beneficiaries. The trust owns the life insurance policy and collects the death proceeds when the insured dies. The trustee then distributes the death benefits to the trust beneficiaries according to the terms included in the trust document. The trust document will identify who the trust beneficiaries are, how and when trust beneficiaries may receive distributions from the trust, and how the money in the trust may be invested. Your life insurance trust may be revocable, meaning that you may make changes or revoke it, or irrevocable, meaning that you may not revoke, alter, or amend the trust once it has been established. The type you choose depends on your individual needs. Life insurance trusts may be established for a variety of estate planning purposes, including: • To provide security for your family after y
Related Questions
- Why is it better to have an irrevocable life insurance trust purchase alife insurance policy on the donor, rather than have the heirs themselves own a permanent life insurance policy with the premium paid by the heirs with gifts by the now- living donor?
- Can I add a new life insurance policy to an existing ILIT (Irrevocable Life Insurance Trust)?
- Can I put a life insurance policy that includes critical illness cover, in trust?
