What is an Insurance Trust?
An insurance trust is essentially an irrevocable policy which cannot be changed or amended for any reason whatsoever. Those who are concerned about the financially well-being of their family in the event that they were to die will want to look at all of the benefits of a trust like this. In order to fully understand what they are about you will want to make sure to take enough time to think about if one is right for you as they are not for everyone. There are a lot of financial specialists who you will be able to contact when trying to put together something like this. These people will be able to let you know how to go about setting up a insurance trust so in the event that something happens to you, your family will be the beneficiaries and receive all of the money which you are insured for. This is insurance mixed with an investment for those who you name as the beneficiaries, so you will be able to know that they are taken care of when you are no longer around.
One of the main purposes and benefits of this type of trust is to significantly reduce the size of your estate and therefore your tax liability. Those who want to avoid being taxed as much as possible will definitely need to consider this as one of the many options that are out there. Those who have one of these insurance trusts will be able to protect the life policy you have against various creditors. You will also be able to have peace of mind by knowing how your trustees are going to get the income as well as when. It is always good to know that when you are gone the people that you leave as your trustees which be taken care of because of a trust like this. When you die you will be passing on your ownership of the investment insurance to a spouse or your children who are officially named as the “trustees”. When you have one of these trusts and die, the proceeds from your investment will be given to your family so you will not have to worry about their financial well-being when you are gone.
There are of course certain risks which are associated with having one of these trusts, such as the fact that those who have a life insurance policy will have to deal with taxes on it after they die. If you do not own the policy then you will not be able to edit it in any way or cancel it. If you decide that you want to leave the proceeds of your insurance policy to your spouse, the estate itself will be taxed but not the policy. Although it is true that one of these trusts can help you to avoid many taxes, if you were to die three years after signing the trust, there is the chance that taxes will be put on it. Overall these irrevocable insurance trusts are a good idea for families that need to be covered when the primary breadwinner passes away. It is also one of the best ways of protecting your savings and you will be able to avoid quite a few taxes.
In order to set one of these trusts up, it might be a good idea to consult a lawyer or financial professional so you will be able to get it done right. Because there is a lot of complicated paperwork necessary to put something like this through, you should probably pay someone else to help you out. Even though you will have to spend a certain amount on these services, all in all it is a good idea for the sake of your family. It will be comforting for you to know that your spouse and/or children are taken care of in the event of your death.
It is very important to remember that once everything is put in motion and you have named all of the beneficiaries of the trust, none of it can be changed for any reason whatsoever. This means that those who list their spouse as a trustee and later on get a divorce will not be able to change their beneficiary to another person. Although they are irrevocable and unchangeable, they can be a great way to avoid estate taxes as well as get peace of mind, so you will know your family will be set financially if something were to happen to you.