Life Insurance Trust
In almost all cases, you should not own your own term life insurance policy, nor should life insurance benefits be paid to individuals. Rather, term life insurance should be owned and benefits paid to a Life Insurance Trust. This is for two reasons:
1. Avoidance of estate taxes. If owned or paid to your estate, or paid to your spouse's estate, the life insurance benefits will be subject to estate taxes. This diminishes the main reason you carry life insurance. Up to half of the benefits could be taken by the federal government in the form of estate taxes. If, however, the life insurance is owned by a Life Insurance Trust and the benefits are paid to a Life Insurance Trust, the Life Insurance Trust can be structured to act just like a Credit Shelt...
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