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How Everyday People Can Maximize the Benefits of Life Insurance

If you are like most Americans, your heirs are probably not going to be greeted by a bank president upon your death. They may not inherit billions of dollars in an offshore trust. However, trusts are not just for the wealthy. There are some clever tricks that everyday people can use to ensure their heirs receive the most money possible without worrying about probate court, taxes, and other unpleasant complications. It is often difficult to accept the reality that once you designate your beneficiaries in a life insurance policy, the money will go straight to those people regardless of any conditions. Likewise, there is little you can do to limit how they spend it or who controls it after you die.

Trusts vs. Insurance

Traditionally, one of the benefits of a life insurance policy was that it does not pass through your estate, meaning it will not be subject to a court’s review. It is a contract between you and the insurance company. Trusts, like insurance policies, are designed to not be part of your estate. Thus, they too are not going to be subject to probate. Here are the three key differences between insurance and trusts:


Can include cash, real estate, personal items, and much more


Includes only cash
Made up of your assets upon death Made up of money owed to you under a contract with the insurance company


Can exercise control for years after death



No control over money after death


Putting insurance into the trust

Contrary to traditional wisdom, you need not name a person as your life insurance beneficiary. You can create a fairly straightforward trust and name it as the sole beneficiary. This way, upon death, the insurance proceeds will be paid to the trust, thereby funding the trust at your death.

Why put insurance into a trust

There are many reasons for doing this, but one of the most important reasons is to establish a sizable inheritance for your heirs without having to be rich. It also lets you make certain key decisions about how that money is spent. Here are just a handful of reasons why someone might wish to do this:

Adult disabled children

If you have an adult disabled child who will require care after you are gone, putting life insurance into a trust can allow a third-party, such as a sibling or trusted professional, to manage the funds for years to come.

Late-in-life marriages

For those who remarry later in life, it may be desirable to provide an inheritance for one’s own heirs and not those of a spouse. The law gives spouses a lot of deference in estate matters. You may choose to name a spouse as a joint-tenant on real estate and bank accounts, thereby easing the transfer of assets at death. But at the same time, you can name your trust as beneficiary of the life insurance policy, thus allowing it to pass to your children.

Trust Issues

Another unique reasons that some of have chosen to use this planning method is where a married couple has disagreement over how they would want their children cared for after death. Likewise, perhaps there are family tensions or conflicts. One can make a trusted relative or friend the trustee of a trust established for the children. This way, if he dies, the money does not go to his spouse to manage for the children, but rather, the trustee will manage it for the children.  In this scenario, the trust can set forth specific conditions on how the money is spent.

Elder law attorneys in Florida

Florida elder law attorneys are not just for seniors. People of all ages seek the advice of skilled elder law attorneys. Eric Millhorn is an experienced elder law attorney with multiple offices throughout The Villages. Contact the Millhorn Elder Law Planning Group for more information today.

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