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Should I use an irrevocable life insurance trust?

When preparing your estate plan, it is always important to deal with your life insurance policy before it can become an unintended frustration for the ones you love. If you do not take proper precautions, your policy can add to your estate so that you cannot avoid probate, which can keep your beneficiaries from receiving your estate for quite some time after you pass away. Fortunately, the law provides just such a solution.

An irrevocable life insurance trust is a way to place your life insurance policy outside of your personal ownership, reducing the size of your estate, while maintaining a great deal of control over the underlying assets. Of course, in order to achieve this usefulness, the trust is irrevocable, as its name implies. This means that you can not dismantle the trust or take the policy out of it once it has been created.

However, if the trust is built carefully, you can still control many aspects of how the underlying asset is handled, through careful wording and by choosing the right individual to act as trustee. With proper planning, you can pre-determine who your beneficiaries will be, and the terms under which they might receive payouts from the policy. This way, you can provide for the ones you love without tying up your estate in a lengthy probate process.

Whenever you are considering a trust, it is wise to consult with an experienced attorney who understands the nuances of your specific state's laws regarding estate planning. Knowledgeable legal counsel can help you contrast the best trust for your needs while working within the specifics of the law to keep your rights and assets protected.

Source: Findlaw, "The Irrevocable Life Insurance Trust," accessed April 14, 2017

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