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Attorney Randy Ratliff

Life Insurance Trusts

Trust and Estates Lawyer Serving Nashville

While every family is unique, certain assets are fairly common: a home, other real estate holdings, investments, automobiles, bank accounts, and life insurance policies, to name a few. However, the manner in which these assets are passed on to the next generation can vary widely, depending on whether a well-considered and appropriate estate plan is in place. Some people labor under the false impression that only the very wealthy need professional estate planning advice, but this is not true. In reality, regardless of one’s age or station in life, it is advisable to speak to an experienced Nashville estate planning attorney about not only a simple will or how to avoid probate, but also about issues such as whether a life insurance trust might be advisable. At the Randy Ratliff Law Offices, PLLC, we regularly help clients with these and other many other issues pertaining to the distribution of assets following death.

Life Insurance and Estate Planning

In most cases, life insurance passes outside of probate unless the deceased person’s estate is named as the beneficiary. However, the proceeds of a life insurance policy can be considered part of a decedent’s estate for federal income tax purposes in some situations. If the estate’s value is such that the estate is subject to federal estate tax, the proceeds of a life insurance policy may also be taxable. Placing ownership of the policy into a life insurance trust may keep the proceeds of the policy out of the taxable estate so that the maximum amount possible will be paid to beneficiaries. Life insurance paid to a trust can also be used to help pay the estate taxes on a large estate so that other assets do not have to be liquidated.

Estates with Minors as Beneficiaries

Another use for a life insurance trust is to protect insurance proceeds that would otherwise be payable to a minor or a person who might not be financially responsible enough to handle a large sum of money. A life insurance trust can be set up to purchase a life insurance policy, receive the proceeds when the insured passes away, and manage the proceeds for the benefit of the minor or financially irresponsible individual. Having a life insurance trust can also speed up the process of making a claim against the life insurance policy after the insured’s death and get needed funds into the hands of beneficiaries more quickly. A knowledgeable estate planning attorney can help you navigate this process.

Rules Governing Life Insurance Trusts

Life insurance trusts are irrevocable, which generally means that they cannot be changed by the person insured by the policy later on, although a modification may be possible in some limited circumstances. There is also a rule that requires that the trust itself – not the insured individual – purchase the policy of insurance. Otherwise, the insured person must live at least three years beyond the time the trust is established in order for federal income tax rules to apply. The insured person cannot be the trustee. Although a spouse or other relative can legally perform the tasks of trustee, it is sometimes advisable to find a qualified professional to serve as trustee. Anyone (except the insured) can be named as beneficiaries of the trust.

Speak to a Nashville Trust and Estates Attorney

If you think a life insurance trust might be an attractive option for your estate, or if you have questions about trust administration in general, an experienced estate planning lawyer at Randy Ratliff Law Offices, PLLC, can help. We regularly advise individuals and families in Davidson and Williamson Counties concerning wills, trusts, and probate matters. For an appointment, phone us at 615-656-8282. We welcome the opportunity to serve the legal needs of clients throughout the greater Nashville area, including Franklin, Brentwood, Madison, and Cool Springs. We also handle family law and elder law matters, including conservatorships, elder abuse, and Medicaid qualification.