A life insurance trust is an irrevocable, non-amendable trust which is both the owner and beneficiary of a life insurance policy. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries. Everything owned in your name at death is includable in your estate for estate tax purposes, which includes the death benefit proceeds of your life insurance policy. A properly executed life insurance trust will reduce the size of your estate and, therefore, reduce the estate tax liability. Additionally, a life insurance trust enables you to dictate who your initial beneficiaries will be and define the terms under which they will receive benefits.
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