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Carrying Out Final Wishes

You can protect your survivors with a trust

If you are looking for ways to provide for your family after you are gone, an irrevocable life insurance trust (ILIT) is one option to consider.

The proceeds from this type of trust can be used as a substitute for the principal earner's wages, to pay university tuition and related educational costs or even for immediate needs like burial expenses.

Irrevocable life insurance trusts are a holding system for the policy itself and effectively removes it from the assets of your estate. Because these trusts are irrevocable, you cannot revert your policy back into your name once it has been designated as part of the trust. However, this does not remove the reins of control entirely. You are still able to name the initial beneficiaries, as well as dictate the terms for their receipt of benefits. You also select the trustee to manage the ILIT.

This is important, because grief can impair your survivors' ability to make the best decisions for their financial futures. Receiving a large lump sum in the immediate aftermath of a tragedy can cause some otherwise responsible individuals to overspend wildly in an attempt to replace the large hole in their lives.

By providing a structured payout over time, your family members can receive installments of enough cash to live comfortably, but not enough to derail a well-planned life.

Distributions may be set up monthly, annually or on another schedule. Lump sum distributions can be directed for a marriage, birth, home purchase or at significant birthdays. Trustees can be invested with the discretion to disburse funds in the event of an unanticipated need or emergency.

Choosing a life insurance policy to fund an ILIT is done once the trustee and beneficiaries have been designated. The trustee then assumes the burden of insurance premium payments as well.

There are many estate planning options; an ILIT is one example. To learn more, discuss your concerns with a lawyer who handles estate planning concerns.

Source: Findlaw, "The Irrevocable Life Insurance Trust," accessed Oct. 01, 2015

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