What is a life insurance trust?

A life insurance trust, or an insurance trust, is a legal estate-planning tool used in Texas to protect life insurance proceeds from estate taxes. It is a type of irrevocable trust that holds the policies of the insured and pays out the proceeds when the insured dies. The trust can be set up in a way that the money is paid out free from estate tax liability. The trust also allows the insured to name the beneficiaries of the policy, such as a family member or a charitable organization. The trust is usually set up with a lawyer or qualified trust administrator in order to ensure its validity. Trusts can be structured in different ways depending on the specific goals of the insured. A life insurance trust can be beneficial for those who own life insurance policies with high premiums and significant value, as it can help reduce the policyholders’ estate tax liability. It also allows the policyholder to control the distribution of funds, preventing the money from being held by an executor. The trust also ensures that the funds are held and distributed as the insured intended. Additionally, the trust can help protect an insurance policy from creditors, as the proceeds will not be part of the insured’s estate. Life insurance trusts are also a way for the insured to protect their beneficiaries from having to pay estate tax on the proceeds of the policy.

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What is a life insurance trust?

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