Life insurance is one of the best investment decisions you can make. Life insurance will provide compensation to your loved ones in the event of your death, allowing them to be financially taken care of. Using a irrevocable life insurance trust is a great way to leave behind benefits to your loved ones but it does so in a different manner from life insurance. A legal trust will end up holding more than one property and other investments and the trustee will be responsible for dispensing the property and other things involved with the trust. You can choose multiple beneficiaries or designate a few individuals. Most individuals will provide the trust to all of their immediate family members as it helps to ensure their financial well-being if you do pass away.
What are the features of a life insurance trust?
This is different from a life insurance policy as it deal with your property and other things. Here are some of the features that are associated with a life insurance trust:
- Independent Entity – the trust will have an owner, who is liable for the premiums and you may choose a single trustee or assign it to multiple trustees to administrate the trust according to your desires. This can help the trust to avoid probate, which can tie up your assets in the courts for several years and could end up causing your property to be turned over to the government instead of to your loved ones.
- Addendums – the policy owner may designate the beneficiaries and can add memorandums to the policy as they age but the beneficiaries are not able to amend the trust in any way. This is the best way to make sure your final wishes are properly carried out.
- Internal Rules – if you have young children at the time of your death, the trust will remain intact and they will not be able to access it until they become 21 years of age. You can designate where the funds must go in order for them to be eligible for the entire trust amount. Many parents choose to include stipulations that their children must graduate from college before they may have access to the full trust amount.
Separation from Insurance
One of the main benefits to irrevocable life insurance trust funds is that they are not owned by a bank or by a life insurance company. This is considered an independent account, which reduces the risk to it such as the investments losing money as is the case with certain life insurance policies. It is also protected from fraud and the beneficiaries will not be deprived of their benefits. Your attorney will be able to set up the trust for you and then it is up to you to choose a smart and honest trustee for the trust.
There are several benefits to an irrevocable life insurance trust such as avoiding large estate taxes and other things. It is one of the best ways to ensure your wishes are carried out correctly after your death and to ensure your loved ones are properly taken care of.
