What Is a Life Insurance Trust?

Upon the insured’s death, the death benefit will be paid to the trustee and dispersed to the recipient or recipients by the trustee.
Why Use a Life Insurance coverage Trust?

Although life insurance coverage trusts do not normally offer advantages over personally-owned policies to the average consumer, there are a few situations in which developing a life insurance coverage trust may be prudent.
Although current tax changes more than doubled the exemption threshold for federal estate taxes, estates worth over $11.18 million are still subject to a 40% tax rate. If the death advantage is transferred to the insured’s estate following his or her death (see our previous blog site post), it may be subject to estate taxes. If the policy was owned by a trustee as part of a trust, it will leave taxation on the insured’s estate since it is not technically “owned” by the insured.

Control Over Distribution of Death Benefit
In a normal life insurance policy, the death advantage is moved from the insurance business straight to the recipient or recipients upon the insured’s death.