Life insurance provides an important safety net for many families. If you are young, raising a family, and going about your life, you may not think about this type of coverage.
However, what if something were to happen to you? Life insurance coverage could help to provide your loved ones with the support they need to carry on with their day to day lives.
In some homes, you may wish to manage these funds carefully. A trust may be able to provide you with that support.
What Happens After Death?
After an individual with a life insurance policy dies, the policy goes into effect. In a matter of weeks, the policy sends a payment to the listed beneficiary. This is a person or trust that you decide on. If you leave it explicitly to a person, that person is able to use the funds for any need he or she has.
In this scenario, you have very little control over how that money is to be spent after your passing. You cannot require your loved one to pay for the home’s mortgage. You cannot require the funds to go to pay for a disabled child. However, if you list the trust as the beneficiary, you can maintain more control.
How Does the Trust Work?
It is important to work with a licensed financial planner to establish the trust. This is a legally binding document. The trust acts much like a separate person. When you die, the proceeds from the policy go directly into the trust. You establish the trust with specific guidelines. This includes naming someone to manage it. You also set guidelines for the use of the funds within it. You gain significant control over those funds and can make key decisions about their use.
The first step is to obtain a life insurance policy that meets your needs. Your insurance agent can help you with this task. You will then want to speak to your agent about your desire to create a trust.
Most insurance agents do not establish trusts personally. However, most family lawyers will do so – and agents can relay pertinent insurance information to them. Your financial estate planner can also help with this task, if you’d prefer.
Once in place, you can elect to create the life insurance policy as you would like to. Be sure to inform your loved ones of your plans. And, be sure to speak to the person you name to manage the trust so they understands your goals. For more information on establishing San Antonio life insurance, contact one of our agents.
Also Read: What is the Best Age to Purchase Life Insurance?