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Trust

A trust is a legal arrangement where a trustee holds assets on behalf of beneficiaries, often used in conjunction with life insurance to manage and distribute wealth.

What is a Trust?

A trust is a legal tool used to manage and distribute assets, often in connection with life insurance policies, such as Indexed Universal Life, Whole Life, Term Life, or Senior Life insurance. In a trust, an individual (the grantor) places assets, such as cash or property, into a legal entity controlled by a trustee. The trustee then manages these assets according to the terms established by the grantor, with the aim of benefiting designated beneficiaries.

In life insurance, trusts are often utilized to ensure that the death benefit is managed and distributed according to the grantor’s wishes. By naming a trust as the beneficiary of a life insurance policy, the grantor can ensure that the funds are used for specific purposes, such as funding a child’s education or providing ongoing financial support for a dependent. This arrangement can also help avoid probate, streamline the distribution process, and provide greater control over how the life insurance proceeds are used.

Using a trust with life insurance can also offer tax advantages. For example, an irrevocable life insurance trust (ILIT) can remove the insurance proceeds from the grantor’s taxable estate, potentially reducing estate taxes for beneficiaries. Trusts can be structured in various ways, allowing for flexibility in the timing and method of distribution. By incorporating a trust into life insurance planning, individuals can create a lasting impact, ensuring their assets are preserved and used according to their long-term goals.