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 ?
Imagine you're the trustee of an irrevocable life insurance trust and you receive a notice from the carrier that the trust's 85 million death benefit policy is going to lapse in 12 months, the insured is 82 years old and the premiums paid to date exceeds 81 million.
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When will a life insurance trust result in income tax savings for the grantor?
The large decrease in total revenue was mainly caused by the substantial decrease in social insurance trust revenue.
Washington Trust, a division of The Washington Trust Company, and a subsidiary of Washington Trust Bancorp Inc (NASDAQ: WASH), has appointed Ann M Nagle as vice president, trust officer of the Wealth Management area's new Group Insurance Trust division.
During September, the NEA Members Insurance Trust is offering a wealth of resources, tools, and information online--everything you need to know about protecting your family financially.
The Medicare Hospital Insurance Trust Fund will run out of money in 2017-2 years earlier than predicted last year--in part because the fund is collecting fewer payroll taxes during the recession, trustees of the fund announced in their annual report.
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