If you are considering a policy for life insurance, you might also consider the benefits of a life-insurance trust. You can enjoy several benefits when you have a life-insurance trust. Your life-insurance agent can help you appoint a trust for your policy. Learn more about what a life-insurance trust is and how it can greatly benefit you and your beneficiaries.
Leaving It All to Your Children
Many people will put a life-insurance trust in their beneficiary child's name to avoid taxation on it. However, in the event you die, your child will receive the death benefits, even if he or she is a minor. Consider your child having a great deal of money at a young age when he or she does not have the experience or knowledge about how to invest wisely. By choosing to place ownership of your policy in the hands of a trustee, you can rest assured the money will not go to your child until he or she is at an age you designate in your policy. Selecting someone you know will guide your children in their eventual financial gain of an inheritance is important not only for your peace of mind but also for ensuring your children achieve the financial security you wish for them through the inheritance you leave for them.
Purchasing a Life-Insurance Policy in Your Name
To avoid the possibility of your policy's benefits being included in your taxable estate after you die, having the trustee you choose buy your policy in their name is best. If you buy a policy in your name, and you are the insured, and then you decide to have it put into the name of a trustee, your policy is subject to the Internal Revenue Service laws regarding insurance benefits for a period of three years. While this may not seem like a big deal at the time you purchase your policy, you should know that if you happen to die within that three-year time period, the benefits from your policy will be included in the taxable assets of your estate, and that will make things harder on your beneficiaries because they will be responsible for paying the taxes.
Taking steps to choose trustworthy ILIT management ahead of your death and your purchase of a life-insurance policy is a good idea. In this way, you can live your life without worrying about your loved ones and what will happen to them after you die. Talk to a professional such as Crummey Service for more information.