I am frequently asked about including life insurance in a revocable living trust. Usually the question is something like this: should my revocable living trust own my life insurance? The answer to that one is generally, no, there’s no need for your revocable living trust to “own” your life insurance.
There are other types of trusts that are set up for the specific purpose of owning life insurance. There’s usually a tax reason for setting up one of those types of trusts. I’m not talking about those today.
But should you include the proceeds of your life insurance in (i.e. make the proceeds payable to) your revocable living trust? That is a different question. The answer depends on your circumstances. If you want the proceeds from your life insurance to be divided up among several beneficiaries, or if your trust will need cash (to do such things as pay bills, or equalize distribution among several beneficiaries where one of them is receiving a valuable asset “in kind”), you might have a reason to include the proceeds of your life insurance in your trust.
You should definitely include your life insurance in your trust if you want the proceeds to be used for your minor children or grandchildren. That’s because you can’t name a minor as the beneficiary of the life insurance without having a conservator appointed by the court. The conservator is the person legally empowered to collect and hold the insurance proceeds (death benefit) for the minor.
On the other hand, if you want a surviving spouse or an adult son or daughter to have access to the death benefit for their own use, it may make more sense to name that individual as the beneficiary of the policy. It is usually possible to name two or three individuals as co-beneficiaries with a percentage of the death benefit going to each.
If you are going to name one individual as the beneficiary of your life insurance, you need to have a backup (alternate) beneficiary. Frequently a spouse or adult son or daughter will be named as the primary beneficiary, with a revocable living trust as the alternate.
Which leads to the final question: how do I include my life insurance in my trust? It’s simple: just name the trust as the beneficiary on the policy. You will need to know how to correctly name the trust on the beneficiary form. I can help with that.
Nathan B. Hannah is a Shareholder in the Tucson office, and practices in the areas of estate planning and administration, real estate, and commercial transactions. He is also a noted blogger, and you can find more of his articles on his private blog,
Contact Attorney Hannah: firstname.lastname@example.org or 520/ 322-5000
This communication is designed to bring legal developments of interest to the attention of our clients and others. It should not be relied upon as a substitute for specific legal advice in a particular matter. For further information on any of the subjects discussed, or for legal advice in connection with any particular matter, please contact us.