Life Insurance Trusts

Thousand Oaks Estate Planning Lawyers

Thousand Oaks Life Insurance Trusts

One way our law firm recommends to minimize federal taxation of life insurance policy proceeds upon death for your designated beneficiaries is create a life insurance trust.

Objectives of a Life Insurance Trust

  • To cause the value of life insurance policies to not be subject to federal estate taxation
  • To create a source of money to be used to pay for future federal estate taxes
  • To have these aspects under the control of a designated trustee to assure your plan is fulfilled

How it works:

  • An irrevocable trust is established
  • A new or existing life insurance policy is transferred into the trust (this causes the value of the policy to be “owned by the trust” and not you)
  • Cash is paid into the trust and the trustee in turn uses this money to pay the insurance premiums
  • At death, the life insurance policy proceeds are received into the trust
  • The proceeds are used to pay federal estate taxation on your estate, but the value of the policy is not included in your estate for federal estate tax purposes (sometimes the cash in the trust is used to purchase assets from your family trust which provides cash to the family trust to pay your estate taxes. The family trust assets which are now a part of the trust are distributed to your designated beneficiaries free of federal estate tax.)

Contact our legal team at (805) 496-4681 if you have questions or would like to create a life insurance trust.