Hi,
LOS 30.h: Life insurance payout is exempt from tax in most jurisdictions.
“Life insurance can be used in combination with a trust… to transfers assets to beneficiaries outside the probate process.”
Am I correct in saying that the only benefit of putting a life insurance policy in a trust for your designated beneficiary is being able to access it sooner since it doesn’t go through the probate process? I.e. there is no financial benefit?
No, there is financial benefit.
@matt123 I understand the financial benefit of a life insurance policy.
My question was: what is the difference between having a life insurance policy by itself, versus having a life insurance policy with a trust as the beneficiary of that life policy. My guess is that there is none and it just skips the probate process and therefore there are less administrative hurdles to access the funding? If it goes through the probate process because there is no trust, it’s exempt anyway.
my thoughts are life insurance’s advantage is its tax-efficiency relative to trusts in many jurisdictions. But trusts do have their advantages such as spenthswifts trust, recovable or irrevocalbe and etc. they both help to avoid probate process. hope that helps.
using life insurance with a trust is considered a “powerful tool” (according to one of the mocks i took)
I think it has to do with the way you can structure a trust for a range of scenarios - also if you pass to an irrevocable trust nobody can try to legally claim the insurance payout
trust => for children - insurance payouts cant go to people below 18 years old
trust=> multigenerational - if anybody knows the other positives let me know