Life insurance is designed to provide financial assistance and opportunity to your loved ones after you pass. In some cases, individuals who have taken out a life insurance policy choose to designate a child as the recipient of that trust. One of the most popular ways to do this is with an irrevocable life insurance trust. This type of trust has tax benefits that can save your beneficiary money when it comes time for them to take out distributions from the trust. Anyone with life insurance can set up this type of trust.
Step 1
Make sure you have either a whole life or guaranteed universal life insurance plan. Term life insurance plans are not effective in a life insurance trust because their value expires after a set--and usually short-term--period of time. If you do have a term life insurance policy, you can talk to the agent who sold you the policy and see if the term coverage can be converted into a whole or universal plan.
Step 2
Determine what child will become the beneficiary of your trust.
Step 3
Meet with your attorney to draft a trust. This is a legal document that will serve as a reference when determining how your assets will be divided up and taken care of. You will have to provide your attorney with the specific life insurance policy number and the company that issued the policy. You will also need to let him know the specific value of the insurance policy and the child you want to be designated as the beneficiary of your trust.
Step 4
Wait for the attorney to draft your trust. Depending on the attorney's backlog, this could take anywhere from a couple days to a few weeks.
Step 5
Read the trust agreement over in detail. Ask any questions of the attorney at points where you do not understand the language of the trust.
Step 6
Sign the trust and have it filed away by the attorney or placed with your other essential documents--such as a will--in the possession of an attorney or lawyer.
Things You'll Need
- Life insurance plan
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