Life Insurance Trust

Definition - What does Life Insurance Trust mean?

A life insurance trust is a program that transfers the ownership and management of a policy to another person or entity for the purpose of properly distributing the money that will eventually be paid out by the policy.

Insuranceopedia explains Life Insurance Trust

The program begins with a person called the grantor assigning a person or an entity (the trustee) with the management of the trust. The trustee then becomes the owner and the manager of the grantor's insurance policies but the decisions they make are based on the provisions written by the grantor. These provisions see to it that when the proceeds from the policy or policies arrive (usually after the grantor's death), they lessen the burden of taxation of the grantor's estate and that the death benefit is distributed to the beneficiaries (usually the surviving family members) according to the grantor's wishes (as expressed in the provisions in the trust).

Banks and other financial institutions are known to have expertise in trusts and are often assigned as trustees.

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