Life Insurance Trust

Life insurance policies offer great peace of mind, as they ensure your loved ones will have access to essential funds after you’re gone. In some cases, the proceeds from these policies are distributed via beneficiary designations, which are documents you fill out upon creating the policy. However, life insurance can also be placed in a trust, which is another essential estate planning tool.

Here at Walk-In Wills, we want clients in Chandler, AZ to be fully informed when it comes to their estate planning options. That’s why we discuss different tools in detail, which helps you make the best decision for your heirs.

How Do Life Insurance Trusts Work?

When a person implements a life insurance policy, they own the policy and have total control over it. After placing the policy into a trust, the trust becomes the owner, and the policy is overseen by a trustee. When the original policy holder dies, the trustee then disperses the proceeds of the policy to heirs in the manner specified by the trust.

Unlike wills, trusts can be designed to disperse assets using certain parameters. You can specify that an heir receives life insurance proceeds when they reach a certain age. You can also disperse assets incrementally with a trust, as opposed to all at once.

Irrevocable vs. Revocable Trusts

When establishing a life insurance trust, you’ll have two different options:

Irrevocable Trusts – Irrevocable trusts cannot be changed once created. While this is limiting, they offer benefits when it comes to taxes, and prevent creditors from accessing funds.

Revocable Trusts – Revocable trusts can be changed during your lifetime, which provides greater control over your assets. However, they don’t offer protection from taxes and creditors like irrevocable trusts do.

Deciding which trust is right for your unique situation can be challenging. This underscores the importance of having an experienced law firm in your corner, as an estate planning attorney can offer professional guidance on how to proceed.

Frequently Asked Questions

1. What is a life insurance trust and why might I use one?

A life insurance trust is a legal tool you set up to hold your life insurance policy. It lets you control how the money is handled after you pass away, instead of having the payout go directly to a beneficiary. This can help protect funds for heirs and make sure your wishes are followed.

2. How does a life insurance trust benefit my family?

By placing your policy in a trust, you can set rules around when and how the proceeds are distributed — for example, staggering payments over time or tying them to specific goals like education or home purchases. It gives your loved ones more stability and clarity.

3. Who manages the policy once it’s in the trust?

When the policy is transferred into the trust, the person you appointed as trustee takes over. They handle the policy and make sure the money goes to your beneficiaries according to your instructions.

We Offer Immense Experience in a Low-Stress Environment

Walk-In Wills has provided estate planning assistance to clients since 2003. While we provide the same level of service as high-end firms, we make sure our services are affordable. We also strive to keep the estate planning process as relaxed and stress-free as possible.