Can A Beneficiary Of Life Insurance Form A Trust After Receiving Life Insurance Proceeds

The insurance company pays the death benefit to the trust and the trust dictates the scenario by which the distributions are made.

Can a beneficiary of life insurance form a trust after receiving life insurance proceeds. For this reason a married person will typically name their spouse as the direct beneficiary of the life insurance policy and name the trust as the successor beneficiary. They then send the beneficiary a packet of forms and instructions explaining how to proceed. An irrevocable trust or a revocable trust can both be listed your life insurance beneficiary and they each come with their own set of pros and cons. Most young families including my own have a revocable trust.

To claim life insurance benefits the beneficiary should contact the insurance company s local agent or check the company s website. Trusts are not considered individuals. If a trust is named as the beneficiary the trustee will have to provide certain paperwork to the life insurance company and the process can take longer typically a few weeks to a month. A revocable trust protects assets as the trust owner you ages.

Therefore life insurance proceeds paid to trusts are generally subjected to estate tax. Some companies ask beneficiaries to start by sending in a form that merely reports the death. Also the proceeds payable to a trust may not qualify for the.