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Estate Plan Review: What is a Life Insurance Trust?

Estate planning is a very important and often overlooked aspect of life. For some, it can be difficult to think about during the prime of life, but it’s better to plan early than later. A life insurance trust lawyer can help you create a plan that will protect your family and assets in the event something happens to you. In this post, we will discuss what a life insurance trust is and how having a life insurance trust lawyer can assist you.

What is a Life Insurance Trust?

A life insurance trust is a way of transferring life insurance benefits to heirs or beneficiaries while avoiding certain negative tax consequences. The life insurance owner transfers ownership of the policy into the life insurance trust, which allows for more flexibility in how and when proceeds are distributed. This gives you complete control over who receives what part of the life insurance funds.

How Does the Process Work?

Your life insurance policy is owned by the insurance trust. The trust owns the insurance policy in your name as the insured. The insurance payout is paid to the trust after you die. The trustee then collects the money, pays any estate taxes or other expenditures and then transfers the funds to the trust’s beneficiaries according to your wishes.

What Are the Advantages of Having a Life Insurance Trust?

You can have more control over how the proceeds of your life insurance policy are used by naming the trust as the beneficiary. For instance, your spouse may be named as the beneficiary of your life insurance policy. If he or she happens to be incapacitated at the time of your death, the insurance funds may come under court supervision. But if your insurance policy names the trust as the beneficiary,  the trustee can utilize the funds to provide them to your spouse without the need for court intervention. Other benefits include asset protection from beneficiaries’ creditors and possible reduction in federal estate taxes.

Contact an Experienced Life Insurance Trust Lawyer

An experienced insurance trust lawyer will help you create a legal document that forms the trust and names the trustee and beneficiaries. This document will also outline the specifics of how insurance benefits will be distributed to your beneficiaries after your death. At Tarta Law, we provide consultations to explore your personal estate planning goals and answer any questions. Contact us today at (201) 444-8448 to learn more. Tarta Law serves the New Jersey Communities of Midland Park, Ridgewood, Glen Rock, Wyckoff, and Franklin Lakes.

Tarta Law Firm NJSteven W. Tarta, Esq. brings more than 45 years of professional experience to his practice, with a sophisticated focus on Estate Tax Planning, Living Trusts and Elder Law.

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