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If a trust has as its only asset a life insurance policy which

is cancelled, is the cash...
If a trust has as its only asset a life insurance policy which is cancelled, is the cash value still part of the trust? The premiums were paid by the creator of the trust with the intention of having the trust funded upon his death. There is a very small gain on the CV vs. the premiums paid and that is taxable but can the CV be distributed by the trustee?
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Answered in 9 minutes by:
7/18/2013
Richard
Richard, Attorney
Category: Legal
Satisfied Customers: 56,009
Experience: Attorney with 29 years of experience.
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Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good afternoon. Do the provisions of the trust agreement relating to distributions have any specific restrictions? Thanks.
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Customer reply replied 4 years ago

when do I receive a reply?

Thank you so much for following up. I was waiting from your response to my question. For some reason I have never received it. Would you mind reposting it for me? I apologize for any inconvenience and thank you for your patience.
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Customer reply replied 4 years ago
There are no restrictions on the distributions
Thanks so much for your reply. In that case, yes, the trustee can distribute the remaining assets representing the cash value to the beneficiaries of the trust. There would be no requirement to wait until the death of the grantor.


Thank you so much for allowing me to help you with your questions. I have done my best to provide information which will be helpful to you. If I have not fully addressed your questions or if you have any follow up questions, or if I have misinterpreted your questions in any way, please do not rate me yet, but simply ask a follow up question without rating so I can provide you with a fully satisfactory answer. If I have fully answered your question(s) to your satisfaction, I would appreciate you rating my service with 3, 4, or 5 faces/stars so I can receive credit for helping you today. I thank you in advance for taking the time to provide me a positive rating!
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Customer reply replied 4 years ago

Is distribution to the beneficiaries mandatory or may the trustee invest the CV and postpone distribution until a period of his choosing?

Thanks for your further follow up. If the trust agreement does not mandate the trust to make a distribution within a certain time period, then it would be in the discretion of the trustee. The trustee does have a fiduciary duty to the beneficiaries, however, so if the beneficiaries contested the withholding of a distribution the trustee would have to justify any unreasonable delay. Typically, however, a trust agreement would give the trustee wide latitude.
Richard
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