Death benefits that are paid out from a life insurance policy can be considerable in nature, especially when the beneficiary receives them as a lump sum. These benefits can either be paid directly to one or more beneficiaries named on the policy, or to a trust that was created for their benefit. This is one leading reason why many people with substantial life insurance policies choose to name a trust as the death beneficiary on the policy.
This is an important way to keep considerable assets outside of an estate when using an irrevocable life insurance trust purchase. This offers many advantages, such as allowing cash to fund a trust that otherwise might not have enough cash assets inside; allows for greater contingency planning in the event that the primary beneficiary is not alive to inherit the assets; and allows for death benefits to be held in a trust to protect them or the beneficiary.
Life insurance policies also help to verify that the trust has enough funds to pay for administration, expenses, debts, and to fund necessary shares.
If you’re concerned about the best way to protect your interests and how to use life insurance trusts to lay out your plans, working with a lawyer can help you avoid many of the most common mistakes.
Schedule a consultation with a trusted estate planning lawyer in Pasadena to discuss your options.