Life Insurance Trust

A Life Insurance Trust is simply a document that acts like a very private and secure box into which you place your life insurance policy. Did you know that upon your death the life insurance proceeds will be included in your Estate?

The advantages of setting up a Life Insurance Trust are:

1.       Reduces your estate tax

2.       Controls the pay out to beneficiaries

3.       Use an independent trustee

4.       Provides for spouse and children

5.       Private document and it is not a public record instrument

6.       Upon your death, no lengthy and expensive probate

7.       Can designate all beneficiaries and determine distribution

8.       Keeps disgruntled and disinherited heirs away from your assets

For example, if you have property, cash and investments worth $2 million and you also have a life insurance policy that will pay your children $1 million. What happened is upon your death, the Internal Revenue Service will include the amount of one million in your Federal Estate Tax return.

Upon creating the Life Insurance Trust, your insurance policy becomes an asset of your trust. The premium to be paid upon your death would be designated as “gifts”. Since you are allowed to give gifts of up to $10,000 per year, per person non-taxable to whomever you wish. The premiums would be divided up in many $10,000 gifts each year for each of whomever you designate, children, spouse, family member or relative.

By creating the Life Insurance Trust and placing your life insurance policy in the trust, your policy would be the asset of the trust; therefore, the life insurance proceeds would be taken out of your estate completely. Another advantage of setting up the Life Insurance Trust is that upon your death, the proceeds of the life insurance would then go tax free to your children and you could also provide for your spouse and other family members as well.

There are several types of Trusts such as Revocable Living Trust, Children Trust, Simple Trust, Complex Trust and Grantor Trust. Based on your individual situation and circumstances, we help you create the proper structure and choose the best comprehensive estate planning that can minimize your taxes and help your children.

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