What is the purpose of a life insurance trust?

A life insurance trust is designed specifically to control and manage the distribution of benefits upon the death of the insured. By placing a life insurance policy into a trust, the policyholder ensures that the benefits will be handled according to their wishes and can be managed by a trustee on behalf of the beneficiaries. This can include stipulations about when the beneficiaries receive the funds, how they can use them, or managing the assets for a period of time to ensure financial security.

Trusts also provide potential tax benefits and can help avoid probate, making the process of settling the deceased’s financial affairs smoother and quicker for the beneficiaries. Therefore, the main purpose of a life insurance trust is not only to provide financial support at death but to oversee and manage those funds in a way that aligns with the insured’s goals and intentions.