When you think about life insurance, you probably imagine a way to support your loved ones after you’re gone. But without proper planning, those benefits can be mishandled or taxed as part of your estate. A life insurance trust helps you take control of what happens to those funds. At Kallio Law Firm, LLC, we help Louisiana families put the right tools in place—so your hard-earned assets go where you want them to go.
How a Life Insurance Trust Works
A life insurance trust—formally called an irrevocable life insurance trust or ILIT—is a legal tool used to hold and manage a life insurance policy. Once created, the trust becomes the policyholder and the beneficiary of your life insurance. When you pass away, the trust receives the proceeds and then distributes them to the people you’ve named.
Because the trust, not you, owns the policy, those funds are generally not counted as part of your taxable estate. This can make a big difference, especially if you have a large policy or other significant assets.
You’ll appoint a trustee to manage the trust. This person follows your instructions and makes sure the funds are used the way you intended. The trustee might pay out the money all at once or over time, depending on the terms you choose.
Why You Might Want One
We work with many clients who want to be sure their loved ones are protected in the long run. A life insurance trust can be a good fit in situations like these:
- You want to reduce or avoid estate taxes on a large life insurance payout
- You’re leaving money to minor children or a dependent who can’t manage funds on their own
- You’d like to ensure your spouse or children receive support over time—not just in a lump sum
- You want more control over how and when the money is distributed
This type of trust allows you to put clear instructions in place and ensures those wishes are followed. We’ll help you build something that works for your family.
What to Know Before You Set One Up
Life insurance trusts offer a number of benefits, but there are a few things to keep in mind before creating one.
First, the trust is irrevocable. That means once it’s set up and the policy is transferred, you won’t be able to take it back or change the terms. This can feel like a big step, but we can walk you through it and help you feel confident in your choices.
Timing also matters. If you already have a policy and you transfer it into the trust, it typically needs to be in place for at least three years before the IRS will exclude it from your estate. If you’re starting a brand-new policy within the trust, you avoid that waiting period altogether.
You’ll also need to choose a trustee. This should be someone you trust to follow your instructions and act in your beneficiaries’ best interests. We can help you think through the right person for the job.
Finally, the life insurance trust should work alongside the rest of your estate plan. It’s not something that stands alone—it should coordinate with your will, power of attorney, and other planning documents.
How We Can Help
Setting up a life insurance trust doesn’t have to be stressful or confusing. We’re here to make the process straightforward and manageable. At Kallio Law Firm, LLC, we’ll help you:
- Understand how a trust fits into your overall plan
- Draft and review all necessary documents
- Transfer ownership of the policy to the trust
- Coordinate the trust with your other estate planning tools
We know that every family is different. That’s why we take the time to listen and craft a plan that reflects your unique situation. Whether you’re just getting started with estate planning or looking to add a trust to an existing plan, we can help.
Contact an Experienced Prairieville Life Insurance Trust Attorney
If you’re thinking about a life insurance trust or want to know if it makes sense for you, reach out to Kallio Law Firm, LLC today. We’ll walk you through your options and help you protect what matters most—on your terms.
