Is a life insurance trust right for everyone?

On Behalf of | Jan 16, 2023 | blog, Estate Planning |

Most are familiar with life insurance, but many don’t realize how much it can do for their financial security. One of the ways you can take advantage of life insurance in Tennessee is by setting up a life insurance trust. The trust is a legal document that spells out how your assets will be distributed after death. It can also protect from creditors and reduce estate taxes.

What is a life insurance trust?

A life insurance trust (LIT) is an irrevocable trust used to hold life insurance policy proceeds for the benefit of named beneficiaries. The trustee manages the trust and distributes the assets according to the terms of the trust agreement.

Who should establish a life insurance trust?

A life insurance trust can be an excellent way to provide for loved ones after death. But not everyone needs a life insurance trust. You may not need a life insurance trust if:

  • You have a small estate, and you are the sole beneficiary
  • You have a simple will that names only a few beneficiaries who will receive your assets
  • You don’t have any dependents

If any of the following are true, then a life insurance trust might be right for you:

  • You want to provide for minor children or grandchildren
  • You want to provide for disabled loved ones
  • You want to minimize estate taxes
  • You want to control how and when your beneficiaries receive their inheritance

How to set up a life insurance trust

The most common method in estate planning is to name the trust as the beneficiary of your life insurance policy. This means that the death benefit from your life insurance policy will be paid into the trust upon your passing. The trustee will then distribute the funds according to your instructions. One advantage to this is that it can help to avoid probate.

A trust can be an asset

A life insurance trust can be a valuable asset and protection for you and your loved ones. Whether you are just starting on the path toward financial security or looking to maximize it, there are many advantages of using a life insurance trust that should be considered. Ultimately, whether or not this type of trust is right depends on your financial goals and needs.

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Costner & Greene Attorneys at Law

315 High Street
Maryville, TN 37804




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