How To Make Smart Moves When Obtaining Life Insurance

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Life insurance is meant to make life easier for your loved ones in the event of your passing. There are several life insurance policy options available to you, with the most common being term life and whole life policies. There is another means of securing life insurance that you should be aware of, which is setting up a life insurance trust.

If you have heard of this option but are not clear on the details, this blog post will help you figure it all out. The following is a description of what a life insurance trust is, as well as its implications for you and your loved ones:

Life Insurance Trust

Definition – What does Life Insurance Trust mean?

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.

Insuranceopedia explains Life Insurance Trust

The program begins with a person called the grantor assigning a person or an entity (the trustee) with the management of the trust. The trustee then becomes the owner and the manager of the grantor’s insurance policies but the decisions they make are based on the provisions written by the grantor. Read more at Insuranceopedia…

Keep in mind that when your insurance benefits are passed on to your loved ones, they will be subject to taxation. If you fail to secure the right protections, your beneficiaries may end up losing a substantial amount of your hard-earned cash to the taxman.

One way to get around this is to set up an irrevocable life insurance trust, as the following post describes:

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What’s an Irrevocable Life Insurance Trust and Why Do I Need One?

Much of estate planning centers on avoiding what can be draconian taxes, and life insurance is a danger area for estate planners. If you own a life insurance policy in your own name, then the proceeds are included in your estate and potentially subject to tax of up to 40%. By using an irrevocable life insurance trust, or ILIT, to hold title to your life insurance policy, you can avoid having the death benefit included as an estate asset, saving your heirs hundreds of thousands or even millions of dollars in taxes. Setting up an ILIT takes complex planning, but it can be worth it in many cases. Read more at The Motley Fool…

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There are other strategic decisions you need to make to ensure that your trust works to the greatest advantage of your family. The following post offers some useful advice on how to accomplish this:

3 Key Considerations

Here are some important considerations to think about as you consider whether an irrevocable life insurance trust is right for you.

  1. Clearly define your wishes. Creating a trust isn’t a slam-dunk. When you create an irrevocable trust, you must make a series of very deliberate decisions about how the trust assets will be distributed after your death. Many people who might be subject to the estate tax procrastinate on these types of tasks because they are busy running businesses, raising children and/or dislike contemplating their own mortality. Read more at Forbes…

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Now that you have a basic idea about life insurance trusts, it’s advisable to consult a professional to proceed. A practicing trust attorney will understand the finer details of the process, especially in relation to state and local laws, and assist you in securing your family’s future. If you’re in North Carolina and in need of insurance trust assistance, Meek Law Firm should be your top choice.

Call Jonathan Meek today at (704) 848-6335 or use the contact form on the right of this page to schedule a consultation appointment. We look forward to hearing from you.

2017-05-26T04:10:27+00:00

About the Author:

As a small business owner, Meek has a passion for working with others who found and work for small- and medium-sized businesses. His goal is to not only help them protect and grow their businesses but also to resolve any personal legal issues they might face along the way. Meek is a member of the North Carolina Bar Association, the Mecklenburg County Bar Association, and the North Carolina State Bar. He is also on the board of Open Aperture Productions, a legal videography firm that he began in 2003. In addition, he participated in many hours of pro bono service during his law school career, including an externship with the Mecklenburg County District Attorney.