Estate Planning and Life Insurance Trusts

January 15, 2020 — by John Conger
Tags: Trusts

An insurance policy formEstate planning is an important tool for dealing with assets and providing for family after a loved one has passed. When it comes to estate planning, there's often some confusion about life insurance trusts and making sure beneficiaries get insurance proceeds as intended.

At Shore, McKinley, Conger & Jolley, LLP, our lawyers navigate clients through the complexities of estate planning and life insurance trusts in Stockton, CA, and the surrounding Walnut Creek area. For help with your estate planning needs, please contact our law firm at your earliest convenience.

Why Are Estate Planning and Life Insurance Trusts Important?

When it comes to life insurance policies and the distribution of proceeds, many people are under the assumption that simply naming a person as the beneficiary is enough to ensure that person will receive the insurance proceeds in the event of the policy holder's death. Unfortunately, this isn't the case.

There are several ways in which beneficiaries may not receive the proceeds as intended. For example, insurance money placed in a bank account of a surviving spouse that is later shared with a new spouse may go to the new spouse instead of the original spouse's children, even if a will stating the children are to get the proceeds is in place.

Estate planning using life insurance trusts can help make sure that proceeds go to the intended beneficiaries.

What Is a Life Insurance Trust?

A trust is essentially an agreement in which one party holds assets on behalf of another party. When it comes to life insurance and estate planning, a life insurance trust offers a means to pass assets or proceeds from a life insurance policy to a surviving spouse or children.

Types of Life Insurance Trusts

In estate planning, life insurance trusts are commonly set up as either a revocable living trust or an irrevocable living trust, as defined below:

  • Revocable living trust: This option may be used by those who already have a trust for their estate established. The trust is then named as the life insurance beneficiary. Any life insurance proceeds go directly into the trust and are combined with the rest of the estate.
  • Irrevocable life insurance trust: An irrevocable life insurance trust may be named as the life insurance beneficiary as well as own the life insurance policy. Individuals can then be named to receive money from the trust.

The Benefits of Life Insurance Trusts for Estate Planning

Naming a trust as the beneficiary of a life insurance policy allows the proceeds to go directly into the trust in the event of the policy holder's death.

This avoids funds going into bank accounts that may change names when surviving spouses remarry, or underage beneficiaries seeing their proceeds dwindle under a conservator until they become 18. This also helps protect funds, making sure the intended beneficiaries receive the assets their deceased loved one intended.

Schedule a Consultation

If you live in or around Stockton and would like to learn more about estate planning, the attorneys of Shore, McKinley, Conger & Jolley, LLP are ready to help. To schedule a consultation, please call our law firm at (209) 477-8171.