When it comes to death, few people relish thinking about their own demise. It is critical that you take the time to plan for your passing if you want to avoid leaving your surviving family members with a significant financial burden. Investing in a life insurance policy payable upon your death can be a great way to provide for the financial needs of your family after your passing, but only if the funds are distributed strategically.
Creating an irrevocable life insurance trust allows you to funnel the proceeds of your life insurance policy into a trust account in order to keep these funds out of probate. Here are three tips that you can keep in mind as you strive to establish an irrevocable life insurance trust in the future.
1. Don't list a family member as the beneficiary of the policy.
In order to ensure that the funds distributed through your life insurance policy go directly into a trust account after your death, you need to ensure that the trust is listed as the beneficiary on the insurance policy.
The establishment of an irrevocable life insurance trust allows the trust to purchase a life insurance policy on your behalf. The trust essentially becomes both the owner and the beneficiary of the policy, allowing funds associated with the policy to remain free from entanglement with your personal funds.
2. Make sure your trust can accept contributions.
If you want your life insurance policy to be included in your trust's assets after your passing, you need to ensure that the trust is set up to receive contributions. Without the capability to receive contributions legally, the funds from your life insurance policy will not be able to be deposited into the trust for your family's use.
An insurance representative can coordinate with you and your attorney to ensure the life insurance policy you purchase will be diverted into your trust account properly.
3. Make sure the trustee pays all premiums.
Although you will be involved in setting up your irrevocable life insurance trust account, you should separate yourself from the premiums associated with the life insurance policy you invest in.
Having the trustee who administers your trust account be responsible for making regular payments ensures that there is a clear title of ownership when it comes to your insurance policy. This will eliminate any complications that could arise when your insurance company attempts to deposit benefits into your trust account after your passing.
Properly establishing an irrevocable life insurance trust allows you to ensure that your surviving family members will be able to access the full financial benefit of your life insurance policy without going through the probate process to do so. For more information, contact a business such as Crummey Service.