Life Insurance Trusts

You would not consider a new house completed if the wiring and plumbing were not yet installed. And it's unlikely that you would walk away from a project while certain tasks related to that project remain unfinished.

Yet, many people believe that their insurance planning ends as soon as they buy what they consider a sufficient amount of life insurance. But insurance planning is like building a house or completing a set assignment or project: Several steps must be taken in sequence before the task is considered completed. And the reality is that buying life insurance is only the first step in sensible insurance planning.

The next step after buying sufficient life insurance is actually thinking about what will happen to the proceeds of your life insurance policy once those proceeds have been distributed. If the proceeds are distributed directly to your beneficiaries, will they invest those funds wisely? Do they have the time or the expertise to make the most of those precious resources until their many short- and long-term needs are met?

If you are unable to answer these questions satisfactorily, then you might consider the life insurance trust as one sensible and easy method of maximizing the benefits of an insurance payout. This type of trust lets you name a trustee who will collect the insurance proceeds when you die. The trustee then invests those proceeds and makes interest and principal distributions to your beneficiaries exactly in the way you instructed when you created the trust.

And life insurance trusts have a built-in flexibility. For example, you can give the trustee the power to tap into the trust principal if an emergency demands such action. Or you can structure the trust document so that it can make provisions to pay for the education of a child or grandchild.

The trust's flexibility really shines where there are minor children involved. The trustee can manage the insurance proceeds for the children until they reach the age where they are capable of handling the proceeds themselves. Also, creating a life insurance trust for minor children helps avoid the expenses and many of the complications of a guardianship.

One other very important aspect of a life insurance trust is that it can be used to unify your estate plan. Any employee death benefits due to your beneficiaries can be made payable to the trust, and you can arrange in your will for other assets to "pour over" to the trust. Thus, all of your assets can be administered by a single trustee.

So, a life insurance trust is really one more step in the protective cycle for your family that you began when you first bought life insurance.

Is an insurance trust for you? That depends on the size and complexity of your estate, the ages of your children or grandchildren, and on a variety of other factors. Call us today. Together, we can determine if a life insurance trust fits your needs.

If you want to know more about First Market Bank's Trust Department or trusts in general please call us at 1-804-327-5749.