Insurance trust

Insurance Trust

An irrevocable trust set up by a policyholder in which he/she places his/her life insurance policy. This removes the policy from the policyholder's estate, shielding it from estate taxes. Importantly, the insurance trust must be set up at least three years prior to the death of the policyholder in order to exclude it from the estate. One might set up an insurance trust in order to set aside cash to pay estate taxes otherwise owed, or to provide for the policy's beneficiaries without concern for the tax. Normally, one sets up an insurance trust when one expects to have an estate worth more than the maximum exclusion figure. It is also called an irrevocable life insurance trust.

Insurance trust.

You set up an insurance trust to own a life insurance policy on your life. When you die, the face value of the policy is paid to the trust.

That keeps the insurance payment out of your estate, while making money available to the beneficiary of the trust to pay any estate tax that may be due, or to use for any other purpose.

If you're married, you may set up an insurance trust to buy a second-to-die policy, which pays the face value of the policy at the death of the second spouse. That allows the first to die to leave all assets to the other, postponing potential estate tax until the survivor dies. At that point, the insurance benefit is available to pay any tax that might be due.

References in periodicals archive ?
Our bipartisan bill takes a compassionate approach by allowing terminally ill patients to receive SSDI benefits more quickly while preserving the Disability Insurance Trust Fund.
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Smithfield Foods received a $5,000 grant for second place, and Safety National awarded South Carolina Municipal Insurance Trust with the $2,500 third-place grant.
The lawyers' fees will be covered by the Public Universities Risk Management and Insurance Trust, with "excess coverage" provided by a United Educators policy the university holds, UO spokesman Tobin Klinger said in an email.
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Auditors first uncovered a deficit in fiscal 2013 in the millions, much attributed to annual underfunding of the town's health insurance trust fund.
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The bank's majority shareholder, Social Security and National Insurance Trust (SSNIT), has finally chosen a buyer, Fortiz, which was one of the three companies short listed a couple of months ago as likely candidates to take over the bank.
We've spent decades protecting our clients from the eroding effects of estate taxes, advising them to keep their life insurance outside of the estate, in an Irrevocable Life Insurance Trust (ILIT), in order to leverage the tax advantages of the death benefit.
A second-to-die contract is perfect for this purpose and is usually purchased though an irrevocable life insurance trust, or ILIT, to prevent the death proceeds from being included in the insured's gross estate.