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What are the benefits of using a life insurance trust?

On Behalf of | Oct 15, 2024 | Estate Planning

A life insurance trust allows you to transfer the ownership of your life insurance policy to a trustee. It can be a powerful tool in estate planning, offering several benefits to ensure financial security for loved ones. 

Reducing estate taxes

One of the biggest benefits of a life insurance trust is its ability to reduce estate taxes. If life insurance policies are part of the estate, they can increase the taxable value. By transferring the policy to a life insurance trust, the proceeds are not part of the taxable estate, which can lower or even eliminate estate taxes. This helps maximize the inheritance passed on to beneficiaries.

Control over distributions

A life insurance trust allows the grantor to control how and when beneficiaries receive the insurance proceeds. This can be especially useful when beneficiaries are young or may not be financially responsible. The trust can outline specific terms, such as distributing funds for education, healthcare, or other needs, ensuring that the money is used wisely. This level of control helps protect beneficiaries from mismanaging their inheritance.

Asset protection for beneficiaries

A life insurance trust also provides protection from creditors. In Georgia, the proceeds held in a trust are generally safe from creditors of the beneficiaries. This means that even if a beneficiary faces financial difficulties or legal issues, the trust’s assets remain protected. This added layer of security helps ensure that the life insurance proceeds are used for their intended purpose and are not lost to creditors.

Securing your family’s future

Using a life insurance trust in estate planning offers many benefits. This tool can help ensure that the management and distribution of life insurance proceeds are according to your wishes, providing financial stability and peace of mind for your loved ones.