Life Insurance Trust Questions
What is a life insurance trust?A life insurance trust is a type of trust that is irrevocable and non-amendable. This type of trust is set up to be the beneficiary of one or more life insurance policies and when the insured person dies; the trustee invests the insurance money and divides the money out to the beneficiary.
Can a person that has an irrevocable life insurance trust cash in the life insurance policy and close the trust?In most cases an irrevocable policy cannot be changed by the person who sets the policy up, but the policy can be closed or emptied by the trustee. The only issue that the person may face is if they have a loan on the life insurance policy and if the person has a loan on the policy, then they would need to check the provisions of the loan to see what the person can do.
Would it be sufficient for a person to file a gift tax on monies that is gained from a life insurance trust?If the gifts are less than $13,000 per person, then the person would not have to report this to the IRS. If the person has the trust set up as a life insurance trust or crummy trust, then this would not be considered to be a part of the deceased person’s estate.
If a person is married to someone who is in the country illegally, can he/she make the spouse a beneficiary of a life insurance policy?The person’s spouse would not have to be a citizen of the country to be a beneficiary of the life insurance. It would be recommended that the person set up a life insurance trust for the proceeds of the life insurance to go into if something happens to the person. With the life insurance trust, the person could set the spouse as the beneficiary and have all benefits of the life insurance going to the spouse.
In the state of California, can a person change a life insurance trust once it is set up?In most cases a life insurance trust is irrevocable, but the person would need to look at the language in the trust documents to see if the trust can be dissolved and what type of circumstances that the dissolving can take place. In the state of California, if the trust does not automatically dissolve after the divorce, then the person would have to go back to family court to get the judge to dissolve the trust. In most cases, when a divorce is filed then all wills or other types of paperwork that pertain to inheritance become null and void. In some cases some of these types of things need the courts to decide to dissolve the issue and a life insurance trust is generally one of these things.
A life insurance trust is a complicated subject. When a person sets up a life insurance trust or is a beneficiary of a life insurance trust, then they may have questions or concerns about the workings or rules of the life insurance trust. Consulting an Expert can clear up any type of confusion or questions that a person mat have regarding life insurance trusts.