When Should Someone Consider Setting Up A Life Insurance Trust?

When should someone consider setting up a life insurance trust? Life insurance trusts can be useful financial tools but you should consult an attorney before obtaining one. There can be many complicated issues concerning taxes and estate laws to sort through but it might be a very smart financial decision for you and.

A life insurance trust can be a great tool for the future of your beneficiaries. If you have a large estate, your heirs will often have to pay large sums of money for estate taxes in order to keep what you have left them. If you leave a piece of property or a home that is very valuable, for instance, your heirs will have to pay the estate tax on it and if the heirs cannot afford the tax, the property could be lost or forced to be sold. A life insurance trust can be set up to help pay estate taxes. Life insurance trusts are not subject to estate taxes because they are not legally owned by the insured but by the trustee that is administering the trust. If you want to leave money to your heirs, a life insurance trust is a good way to avoid paying estate taxes on sums of money as well. Joe Sostarich, a 26-year veteran of life insurance sales and management tells us, "If you want to set up an estate for your children or grandchildren, a life insurance trust is a sensible option."


Another reason to set up a life insurance trust is to care for your spouse, whether they be disabled, living in a special care facility, or if you just want to insure a steady income to them once you have died. Life insurance trusts can be set up to make payments to your spouse or to their care facility after you die. Joe says, "Knowing that your spouse will be taken care of when you are gone can take a lot of stress off your shoulders." The income that your spouse receives from the trust will help to support them without allowing them to lose large sums of money by making poor choices.




If you want your heirs or beneficiaries to receive money right away after you die, a life insurance trust is the way to go. When you leave money to your heirs in a will, the will needs to go through a lengthy probate process. The probate process can last anywhere from 6 months to two years, during which time your heirs that you meant to take care of could be financially on their own. Life insurance trusts are not subject to probate. Leaving a life insurance trust can help protect your financial privacy because the details of it will not be subject to a public court when you die.

A life insurance trust is also protected from the creditors of your beneficiaries. If you want to leave money to your beneficiaries who may have credit issues, a life insurance trust will not be seized by creditors or considered as an asset. A trust can also give a beneficiary better leverage when applying for any type of loan as it will be considered a permanent and irrevocable source of income. Anyone who has family members that could use a boost with their credit might consider an insurance trust as a way to help them without giving them a large lump sum of money that they could be irresponsible with.

Life insurance trusts can be useful financial tools but you should consult an attorney before obtaining one. There can be many complicated issues concerning taxes and estate laws to sort through but it might be a very smart financial decision for you and those that you leave behind.

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