1. 12689 POINTS
    Ted Ratliff
    Owner, SFS Associates,
    Generally speaking a life insurance policy is used to fund the trust.  The trust spells out the conditions upon which the money can be paid out.  For exam a Funeral Trust uses a life insurance policy that uses the trust as the beneficiary.  The terms of the trust state that the funds can only be used to pay for matters related to final expenses.  The life insurance policy is just the funding vehicle, the trust is the legal document specifying how those funds are used.
    Answered on April 25, 2013
  2. 4330 POINTS
    Jerry Vanderzanden, CLU, ChFC
    Co-Founder, Coastal Financial Partners Group, California
    Life insurance does not need a specific life insurance trust to be the life insurance owner and/or beneficiary but it can provide some additional flexibility in planning. The decision to engage an experienced estate planning attorney to utilize a life insurance trust is usually reserved for more complex situations where the set up and maintenance costs can be justified.

    While there are many different types of trusts, an irrevocable life insurance trust is a trust with the primary purpose of owning a life insurance policy in order to remove life insurance proceeds from the taxable estate and, as a result, avoid paying estate taxes on those proceeds.
    Answered on April 25, 2013
  3. 0 POINTS
    David RacichPRO
    Fountain Hills, Arizona
    Assuming you are addressing irrevocable life insurance trusts (ILIT), the chronology of events and ownership are very important. The grantor cannot have any incident of ownership. The ILIT must be the owner and the date of the ILIT must precede the policy date. The ILIT will name the beneficiaries of the trust and premium paid by the ITLIT grantor must conform to annual gift tax or unified credit rules to avoid taxation of premiums. Consult your legal adviser before moving forward with any creation of ILIT.
    Answered on June 1, 2013
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