Two of the biggest concerns individuals have with estate planing are taxes, and a lack of control. Luckily, a solid estate plan can reduce taxes and give you more control over your assets. A life insurance trust is one tool that is particularly helpful. When you need to establish a trust in Minnesota, our experienced attorneys are here to guide you through the process.
Minnesota Life Insurance Trust
A life insurance trust is a type of irrevocable trust that ultimately gives you more control over your policies by allowing you to dictate what happens to the money that is paid from them. Some of the benefits of a life insurance trust include:
- Immediate funds to pay estate taxes after death;
- Reduction of estate taxes;
- Avoiding probate;
- Increased control over insurance policies;
- Income provided to spouse without being included in spouse’s estate; and
- Removal of court control over insurance policies
The life insurance trust has three components: the grantor, the trustee, and the beneficiary of the trust. The individual policyholder is the grantor. Typically, the trustee will be someone who will manage the trust. In most cases, you will not want to name yourself as the trustee. The beneficiary can be anyone you want to receive the benefit upon your death.
A life insurance trust gives you more control of your policy because it allows you to determine how the funds will be used. For example, the funds could be used to pay taxes, get loans, or provide a spouse with lifetime benefits. There are many ways to manage a life insurance trust, and a qualified estate planning attorney can provide more details during a consultation.
With a life insurance trust, you can typically reduce the tax burden of the policy beneficiary. Estate taxes are often a huge burden on the heirs of an estate. Estate taxes can cost an heir up to 50% of the inheritance. A life insurance trust can make these taxes more manageable.
When you establish a life insurance trust in Minnesota, the trust becomes the owner of the policies. This transfer of ownership typically means that the policies will not be included in the required taxation of your assets. However, this does not mean you will necessarily be exempt from paying taxes on these policies. There are exemption thresholds, and these numbers can change. Whenever you plan to establish a trust, it is always wise to consult with an attorney.
If you are interested in establishing a life insurance trust, or any other type of trust, our lawyers are here to help. Even if you aren’t sure which type of trust will work best for you, we can guide you through the process and help you understand your options. Contact the Brown Law Offices, P.A. today at 763-323-6555.