What is an irrevocable life insurance trust?
An irrevocable life insurance trust is a way to avoid estate tax in Massachusetts, by transferring ownership of life insurance policies to a trust. This type of trust is established and it can be used to protect assets for children, grandchildren, or other loved ones. It is important to note that once the trust is set up, it cannot be changed or revoked. Under the trust, the policyholder appoints a trustee who will be responsible for managing the trust, following the instructions of the policy holder. The trustee will have to follow the directions set forth in the trust document. The policyholder will also select beneficiaries who both have the right to receive the death benefit from the policy and be the beneficiaries of any income generated from the trust. When a person passes away, the life insurance death benefit is paid to the irrevocable trust and is not a part of the estate. This helps to avoid hefty estate taxes. The income generated from the trust can be used to pay life insurance premiums or other expenses of the beneficiaries. In Massachusetts, it is important to understand the different types of trusts, and the importance of having an irrevocable life insurance trust in order to ensure the protection of family members from estate tax. The importance of having the trust set up correctly by a knowledgeable attorney is vital to make sure the trust is in compliance with the laws of the state.
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