Smart Estate Planning with a Life Insurance Trust

Fifth Third Bank


Life insurance can be a key component of an effective estate plan. It can provide the funds necessary to pay a variety of estate and family expenses following the death of a wage earner.

However, even the best laid-out plans can unravel. Estate taxes could reduce the amount of money your beneficiaries actually receive. Your life insurance proceeds could have been invested unwisely. Whatever the situation may be, a life insurance trust can help eliminate undesired outcomes.

With a life insurance trust, the trust acts as the owner and beneficiary of your life insurance policies. When you die, your trustee — our institution, for example — collects the policy proceeds and invests them according to your instructions. Your trustee then distributes trust income and principal to your beneficiaries in the manner specified in your trust agreement.

This arrangement benefits both you and your beneficiaries in three ways:

1. Tax Advantages*

In most cases, your beneficiaries receive your policy’s death benefits free of federal income taxes. You can also use life insurance for estate liquidity, since beneficiaries can use the payout to pay approximate estate tax liabilities.

2. Professional Management

Investment professionals invest the proceeds of your life insurance policies prudently and effectively. They also keep detailed records for your trust.

3. Flexible Distribution Options

You determine the amounts that will be distributed to your beneficiaries and the circumstances of distribution. If you choose, you can also grant your investment professional discretionary power to make distributions from the trust. A life insurance trust helps ensure that the proceeds of your life insurance policies are carefully managed and distributed.

Contact your Fifth Third Bank advisor to learn more.

*Fifth Third does not provide tax or legal advice. Please consult your tax advisor or attorney before making any decisions or taking any action based on this.