Why Traditional Life Insurance is Often Owned by Irrevocable Trusts
It is not uncommon for life insurance policies to be owned by irrevocable trusts. There are many reasons why this might make sense, including:
- Keeping the death benefit out of the grantor/insured’s taxable estate;
- Providing a convenient and tax-efficient way to make lifetime gifts of the insurance premiums; and
- Offering a potentially greater level of creditor protection for the policy.
For these (and perhaps other) reasons, clients purchasing Total Living Coverage® may ask whether it can be owned by a trust.