What Is A Life Insurance Trust at Life

What Is A Life Insurance Trust. The main draw of creating this type of trust is that the insurance proceeds—often a hefty sum—will not count as part of your estate for. The trust is designed in such a way that the federal estate taxes on the insurance proceeds are avoided upon the death of the trustor or spouse.

A life insurance trust provides one with more control over one’s insurance policies and the funds that are paid from them. A living trust is designed to circumvent the complex and expensive legal process of probate. An insurance trust is an irrevocable trust set up with a life insurance policy as the asset, allowing the grantor of the policy to exempt assets away from his or her taxable estate.

Insurers reveal success rates on claims for car, travel

It also allows one to lower or remove estate taxes so that a larger portion of the estate can be left for one’s beneficiaries. A life insurance trust is a program that transfers the ownership and management of a policy to another person or entity for the purpose of properly distributing the money that will eventually be paid out by the policy. As a result, the proceeds are not counted in your estate when you die. The type of life insurance trust that offers estate tax savings is called an irrevocable life insurance trust, or ilit.