answersLogoWhite

0


Best Answer

A life insurance trust is used to remove the assets and death benefit of the life insurance policy out of the insured's estate for estate tax purposes. If the insured were to remain the owner of the policy, the policy procedes would be estate taxable at the time of death. This is a non-issue if your assets are less the the allowable estate tax limits.

User Avatar

Wiki User

โˆ™ 2007-11-09 20:35:20
This answer is:
๐Ÿ™
0
๐Ÿคจ
0
๐Ÿ˜ฎ
0
User Avatar
Study guides
๐Ÿ““
See all Study Guides
โœ๏ธ
Create a Study Guide

Add your answer:

Earn +20 pts
Q: How does a life insurance trust work?
Write your answer...
Submit
Related questions

What does life insurance trust do?

A life insurance trust is a form of trust which is both the owner and the beneficiary of one or more life insurance policies. It an irrevocable and non-amendable trust.


Security Trust Life Insurance Company Macon Georgia?

What is security trust life insurance company macon Gao


What happen to National Trust life insurance co?

Monumental Life Insurance Company is handling the National Trust Life Policies. Their toll free number is 1-800-638-3080


What is an irrevocable life insurance trust?

A life insurance trust is an irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries. (Moved from discussion comments below)


Can a trustee in an irrevocable life insurance trust borrow money from a life insurance?

No to avoid estate tax penalty


Is life insurance taxable?

Life insurance proceeds paid to a beneficiary is not taxable. However, if the life insurance beneficiary is a trust or estate, there may be some tax implications.


Is a trust funded by life insurance policy after death of trustor?

A life insurance policy is an excellent way to fund a trust. Any way of placing necessary funds into the trust are acceptable. If you have cash and wish to fund it with cash this is fine. Life insurance is a good way to fund a trust because you can pay premiums and be assured that the money will be there when you die to fund a trust that you want to set up for someone.


Do you have to pay taxes when you receive money from a life insurance claim?

If you are an individual who receives the life insurance proceeds, you may not have to pay any federal income taxes on the benefits. If the life insurance policy names a trust as beneficiary, the trust may be subject to estate taxes.


Where can one find more information about life insurance?

Someone can find more information about life insurance from a number of companies such as All State Insurance, Geico Insurance, RBC Insurance, and TD Canada Trust Insurance.


What happened to Piedmont Southern Life Insurance and Southern Memorial Life Insurance?

Piedmont Southern Life Insurance Co. merged with Georgia International Life Insurance Co which became Integon, then Security Life and Trust, then Soutwestern Life, then finally merged with Valey Forge Insurance Co in Chicago.


Living trust life insurance of 50.000 can the mortgage company attach that insurance when it goes to probate upon my death?

Usually not. But it depends on the trust. But 99.9% of the time, no.


Can you trust your life insurance agent to help you?

never in the hols world


How does a Universal Life Insurance Policy work?

Universal Life Insurance Policies work by giving death benefits when one dies. Unlike other life insurance policies, universal life insurance policies generate interest over time.


In what year was the Guarantee Trust Life Insurance Company founded?

The Guarantee Trust Life Insurance Company was founded in 1936 in Glenview, Illinois. They serve individuals and families in forty-nine states and the District of Columbia.


Who are the competitors in direct life insurance?

Direct life insurance is offered through several mediums - commericals with a phone number to call, through the mail, and on the internet. There are several life insurance companies that provide direct life insurance through any one or all of the mediums listed above. Some direct life insurance writers include the following: RBC Insurance, HSBC Insurance, Liberty Life Insurance, Garden State Life, Colonial Penn, Gerber Life, Stonebridge Life Insurance and Guaranty Trust Life Insurance.


What happens if you find additional insurance policies where beneficary listed is absolutely excluded in trust?

In order to find a trust with life insurance proceeds the trust must be named as the beneficiary of the insurance policy. Then the trust documents specify what the funds are used for that are in the trust. If there are other life insurance policies that are still active and have other individuals named as the beneficiaries then the money from those policies cannot be placed into the trust and will be paid directly to the current beneficiary listed with the insurance company. The trust will have no claim whatsoever on these policies. It could be that these policies had their beneficiary changed when the trust was set up and the trust is the current beneficiary of them as well and he just didn't put the change form in the policy. Whatever is on record with the insurance company will be the person that the benefits are paid to no matter what.


What is the use for an insurance trust?

The main use for an insurance trust is that it will reduce the size or even eliminate any estate taxes that one may have - it's mainly for those who may have a large life insurance policy.


Your daughter was named beneficiary for her fathers life insurance the money was put in a trust fund until she turned 18 Upon reaching 18 will the money she receives be taxable?

No. Life insurance proceeds are not taxable. However, depending on the trust, the earnings, if any, while in the trust may well be.


Does seeing a pychologist diqualify a person from life insurance?

Not at all as long as you get to the "right" life insurance company. There are a number of life insurance companies that specialize in depression life insurance, bipolar life insurance, anxiety life insurance. The key is to work with an impaired risk life insurance expert who can direct you to the correct company based on your specific circumstances.


What is a professional occupation for a life insurance policy?

A life insurance policy is not a person and does not work therefor it does not have a professional occupation.


What is the benefit of placing term life insurance in a irrevocable trust?

The grantors of an irrevocable trust can take out life insurance on themselves and put it (term or whole life insurance) in the trust in order to pay the estate taxes on their estate assets when they die. This allows the grantor (giver of assets) to leave his estate assets to his children or someone else (beneficiaries) without them having to pay estate tax, or death tax as some call it.


Topics for life insurance?

Here are some topics for Life Insurance: What is life insurance? How does life insurance work? What are the different types of life insurance? What are the top life insurance companies? How do I get the best price on life insurance? What is a beneficiary? How can I save money on life insurance?


Life insurance children as beneficiary?

It can be done but is not often reccommended. I would suggest you look into setting up a trust and name the trust the beneficiary.


How do you find out the value of an old life insurance policy from Mutual Trust Life Insurance Company?

Mutual Trust is now Met Life, and they are actively redeeming these policies. If you have death certificates and sundry other proofs, which they list, they will pay up on the policy. Be sure to check their website for more information.


Can you still receive life insurance money if it is not named in a will?

In order to receive life insurance death benefit money, you must be named as a beneficiary in the life insurance policy with some exceptions. Some exceptions to this may be: All the named beneficiaries are not living. In this case, the life insurance benefit would become part of the estate and be paid out according to the will or trust. If the life insurance was payable to a Trust, then the Trust determines who receives the proceeds. If the insured party dies and there are no beneficiaries alive and there is no will or trust, then the state probate court would determine who gets the proceeds. Feel free to ask more. Brian Lombardo, CPA, Agent