A Survivorship Life Insurance Trust is a specialized type of trust designed to hold a life insurance policy on the lives of two individuals, typically spouses. This trust serves to provide financial support to the surviving spouse or beneficiaries after the death of one of the insured individuals while also addressing estate tax implications and ensuring that the benefits are distributed according to the grantor’s wishes.
In a Survivorship Life Insurance Trust, the policy is owned by the trust rather than the individuals. Upon the death of the first spouse, the trust receives the life insurance proceeds, which are not included in the taxable estate of the deceased. This can help mitigate estate taxes for the surviving spouse and any beneficiaries. The surviving spouse often remains the trustee, allowing them to control the assets in the trust.
The trust can specify how the proceeds are to be distributed, whether used for the living expenses of the surviving spouse, to pay off debts, or to provide an inheritance to children or other beneficiaries. This flexibility ensures that the financial needs of the surviving spouse are met while maintaining clear directives regarding the eventual distribution of assets.
For example, if a married couple establishes a Survivorship Life Insurance Trust and one spouse passes away, the trust can provide immediate liquidity to pay for funeral expenses or ongoing household costs. This setup ensures that the surviving spouse does not face financial hardship during a difficult time, while also preserving the trust’s assets for future distribution.
In Texas, including areas like Houston, establishing such a trust can be particularly beneficial for couples seeking to manage their estate efficiently, especially given the state’s favorable tax environment and the potential for significant property values.
« Back to Glossary Index