Understanding Why You Should Invest In A Life Insurance Trust

25 April 2017
 Categories: , Blog

When you're looking at long-term life insurance investments, one of the things that you should think about is investing in a life insurance policy that will allow you to protect your assets and secure your future. For example, a life insurance trust is an option that allows you to preserve your financial stability and protect your family. Here's a look at a few reasons why you should consider talking to your insurance agent about this type of policy.

It Comes With Tax Benefits

A life insurance trust is a trust formed to hold the cash value of your life insurance policy. The proceeds that are credited to the trust are exempt from income tax. In addition, the money withdrawn by the trustee is also considered tax-free, which ensures that your trustee is receiving the full value of the trust.

This kind of trust account will also help you to minimize the taxable estate. The gifts you make to the trust for premium payments will actually reduce the value of your estate. This can also help you to get your estate's total value under the estate tax exemption limit. This could save the beneficiaries from having to pay any taxes on the estate itself when they inherit it.

It Can Help You Protect Your Assets

Using a life insurance trust is an ideal way to protect your assets. Putting your assets into this type of trust means that the trust itself owns the assets. They are a separate entity, so they're not vulnerable to things like court claims. Your trust won't be held responsible for judgements placed against you personally because it's not your personal financial asset. This ensures that the assets you want left for your heirs will remain theirs no matter what happens.

It Allows You To Define Access Limits

Using a life insurance trust also gives you the freedom to set limitations on the access of the money. If you want to define solid rules about how your beneficiaries are able to get to the money, you can set those limitations. This will ensure that you can keep that money from being accessed all at once and blown irresponsibly. Instead, you can set age restrictions and distribution stages so that the money is funneled gradually.

As you can see, a life insurance trust can be a beneficial investment. Before you decide to invest in any kind of life insurance policy, talk with your agent about putting money into a life insurance trust instead of a traditional policy. For more information, contact a company like Crummey Service.