If you’re looking for another way to insure yourself with a life insurance policy that will avoid any taxes after your death, then you should look into getting a life insurance trust. What is a life insurance trust? This is a trust that is set up for the purpose of receiving any of your life insurance money after your death. The result is that whoever you give the trust fund to will get all of your life insurance money without estate taxes being added on. In this way, you can avoid the hefty estate taxes that you might have to worry about otherwise.
The most important thing that you should consider before you set up a life insurance trust, is who will be the beneficiary. Of course, making yourself the beneficiary is a terrible idea. You should also make sure that you choose the right person when you set up the trust since in most cases, you will absolutely have no chance to change it. The best options are people in your family who are going to be inheriting your estate anyway. In this way, you can make sure that your loved ones will be cared for even if you are not around anymore.
The other thing that you should consider is that not all policy to trust transfers will happen immediately. Depending on the area that you live in, there may be different rules that affect when your transfer has taken place. A standard length is three years, which means that if you die before three years have passed, your life insurance policy still technically belongs to you, which means that it will be subject to all of the estate taxes that may apply.
However, even though there are a few things that you should be careful about (make sure that you know the person you are leaving this money to very well), a life insurance trust is a good idea. This way, you can make sure that the beneficiary of your life insurance trust will get all of the money that they need. This option also has the added benefit of helping you to avoid estate taxes – which can be almost 50% of your estate money after you die.