Should I consider using a trust with my insurance policies as I create my estate plan?

You may discover that there are many benefits to incorporating a life insurance policy into your estate plan. How these insurance policies are held is an important consideration. Using a trust is often an excellent way to ensure that the insurance policy benefits your overall estate planning goals.

Trust Utilization Options

If you opt to utilize a trust alongside your life insurance policy when creating an estate plan, you generally have two options:

  1. Create a revocable living trust to be the beneficiary of your life insurance policy. Using a living trust allows you to maintain control over the policy. You will still have the ability to change the beneficiaries, terminate the policy, and revoke or amend the trust itself. Revocable trusts are useful in many cases—especially for families with young children who are the primary beneficiaries.
  2. Create an irrevocable life insurance trust. Using this type of trust has the added benefit of keeping the proceeds of the policy outside of your estate for estate tax purposes. If you pass away before your spouse, the trust can be set up to allow your surviving spouse to receive income from the proceeds. However, your surviving spouse will not have rights or powers over the principal of the proceeds. Instead, your successor trustee will have this power.

Regardless of which type of trust is right for your estate plan, it is important to seek assistance from an experienced estate-planning attorney who understands the complexities of trusts and life insurance policies.

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