What is a life insurance trust? - A life insurance trust is a trust that has as its primary or sole asset, the beneficiary status and thus potential proceeds of a life insurance policy.  These are ideal mechanisms providing security for families with minor or otherwise disabled children.

Life insurance itself is only half the equation in protecting children from the untimely death of parents.  Without proper documentation and direction, someone will petition the court for letters of guardianship of your children--someone other than your first choice. Perhaps your own elderly parents, or a brother or sister.  By establishing a life insurance trust, you can remove some incentive from less favored individuals as your named trustee will manage the insurance proceeds, not the court-appointed guardian.  The trustee may also be directed to fund a legal proceeding requesting the appointment of your preferred guardian who may or may not be identical to your preferred trustee.

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