So doesn’t a life insurance policy usually just pay a lump sum to the beneficiary? The answer is yes unless the beneficiary is a minor. If that is the case, the UTMA (Uniform Transfer to Minors Act) or a guardian will need to be appointed which costs time and money. The guardian will have to control the assets and administer the proceeds until the minor reaches the age of majority. A lump sum can also be thought of as an outright gift because there is no control or restrictions.
Outright gifts can present a variety of problems such as:
For these reasons alone a gift given in a Trust is preferable. A Trust (a Revocable Trust or an Irrevocable Trust) can control or guide the proceeds and provide very little control, to a high level of control.
An ILIT (Irrevocable Life Insurance Trust) can be structured just like a Revocable Living Trust in how the proceeds are to be given to the beneficiaries. The Trust can provide no guidance or control, or the Trust can provide a lot of guidance and control over the distribution of the proceeds.
Please see my Blog for continued discussion of various aspects of ILIT Trusts.
See lots of estate planning information on my website at: www.myestate-plan.com
Please feel free to give me a call and we can establish your Living Revocable Trust, ILIT, or other Estate Planning goals today. If you have specific estate planning objectives, I can help create solutions to achieve your specific purpose.
Thanks for reading my blog.
William Daniel Powell
This document is for informational purposes only. Nothing in this is to be considered legal advice. Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship. If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction. I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.
Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.