Transferring Life Insurance Policies to Your Trust

Transferring the ownership of life insurance policies directly to a trust is often considered unnecessary because the primary concern is usually about directing where the proceeds of the policy go after the policyholder's death, rather than who owns the policy during the policyholder's lifetime.

How can you designate where the life insurance proceeds go?

  • Utilize Beneficiary Designation: Life insurance policies typically allow you to specify where the proceeds will be distributed through a Beneficiary Designation.
  • Direct Proceeds to Individuals or Trusts: You can choose to have the proceeds paid directly to individuals, such as a spouse or child, or direct them to a trust.
  • Advantages of Directing Proceeds to a Trust: When proceeds are paid to a trust, they are managed according to the trust's terms, providing more control over the distribution, which is beneficial especially if the beneficiaries are minors.

What is a common approach to designating beneficiaries?

A widely adopted strategy involves naming a spouse as the primary beneficiary and the trust as the contingent beneficiary. This method ensures that the spouse benefits directly from the proceeds while still engaging the trust as a backup to manage the funds under unforeseen circumstances or if the primary beneficiary is unable to receive the benefits.

How can you update your beneficiary designation?

Each life insurance carrier has its own Beneficiary Designation forms, so you can contact your carrier for more information and request any forms required to update your beneficiary designation.

Learn more with this short video about life insurance beneficiary designations:

More Resources

Review a guide in our Learn Center: Life Insurance Beneficiary Rules & Mistakes to Avoid

View, download, or print our comprehensive guide to funding your Trust: Trust Funding Guide

Learn more about transferring various asset types to your Trust: Funding Your Trust: How to Transfer Assets to a Trust

 

 

This information is intended as a reference only. It is not legal advice nor intended to cover every possible situation. Please consult an attorney if you have specific questions. Some details for funding your Trust may change over time. For example, if the Trustee changes, that would likely affect how you would title assets held in the Trust.

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