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Ask the Life Insurance Expert

Is it possible to name a trust as beneficiary?

Yes, you absolutely can name a trust the beneficiary to your life insurance policy.  

Often trusts are set up as the beneficiary to a life insurance policy if there are child beneficiaries that you want the money to go to -- note that insurers won’t send benefit checks directly to minors -- or beneficiaries who are disabled or have special needs.

Also, an irrevocable trust can reduce or eliminate estate taxes.  With this type of trust you transfer your life insurance policy into the trust, which becomes the owner of your policy, and name a trustee (it cannot be you).  However, you can set up the terms of the trust so that you determine how premiums will be paid and how payments should be paid to beneficiaries.

An irrevocable trust needs to be put in place at least three years before your death.  This is an IRS requirement to prevent last-minute transfers to trusts in order to avoid estate taxes.

Read “Irrevocable life insurance trusts can skirt taxes but cost you flexibility” to learn more about the pros and cons of life insurance trusts.

Last updated: May. 28, 2014