Choosing a life insurance plan can help your Nevada family in the event of your death. A life insurance trust might be the right choice for you if you’re searching for a plan that allows you to manage better some of the aspects of incorporating a life insurance policy into your estate planning.
Benefits of irrevocable life insurance trusts
When you’re looking for a way to cut down on the amount of taxes that your heir will have to pay in the event of a life insurance payout, an Irrevocable Life Insurance Trust (ILIT) can greatly cut down on the amount of money that the recipient has to pay in taxes. The grantor, or the person setting up the trust, can put the life insurance policy within the ILIT, making the trust the owner of the policy rather than the grantor even before the grantor’s death. Another significant benefit of putting a life insurance policy in a trust when estate planning is that there’s a trustee who can ensure that the benefits are distributed to the beneficiaries the way that the grantor originally intended. Plus, by putting the insurance inside the trust, there’s a bit more privacy because the trust isn’t subject to probate, so part of the assets passed along is shielded from public eyes.
Revocable and irrevocable trusts
There are both revocable and irrevocable trusts, and an ILIT is an irrevocable trust, which means that the grantor can’t change or end the trust after its creation. Both of these types of trusts can help the beneficiaries significantly because trusts avoid the probate process, which can eat up a lot of the estate money. Plus, the probate process can take years.
Regardless of the type of trust that you use, your beneficiaries will be thankful that you took the time to plan your estate and find all of the tax loops for them.