Should you make your trust the beneficiary of your life insurance?


Making your trust the beneficiary of your life insurance is probably not necessary if you are leaving your wealth outright to your adult children. However, if you have minor beneficiaries or spendthrift children, then make your trust the beneficiary of your life insurance is a good plan.


Attorney Tom Olsen: We have a text, Chrissy?

Chrissy: We do, Tom. This is about a listener that has a living trust. The question is, she wants to know should she make her life insurance payable to the trust and her bank accounts but she also-- her home is owned by the trust.

Attorney Tom Olsen: Okay. Life insurance does not go through probate. Let's say she's got adult children that are beneficiaries of her estate, I'm okay with her naming her adult children as a beneficiary of her life insurance. However, let's go step back a minute. Let's say that her living trust includes minor grandchildren, and they're going to inherit a portion of her estate.

Let's say that she's got a spendthrift child and when she passes away, she does not want her money to go outright to that child. She wants that child's share of her estate to stay in trust, be doled out to him or her over a number of years, that would be a reason then to name her trust as a beneficiary of her life insurance. Does that make sense to you?

Chrissy: It does to me. I would believe that again more people have this question, so thank you for clarifying and that is that one can name individuals to their policies as beneficiaries and they don't have to name it to the trust. However, sometimes what can be a good idea is, they can name the trust as the backup.

Attorney Tom Olsen: Yes, that'd be a good plan. I like that. Yes. She said that her home is owned by her trust. I say good for her. I've been doing living trust for gosh, 25 years now and back in the day, a lot of lawyers who did living trust did not put your home into your trust. They had reasons for it but the bad news is that that means that your home will be going through probate. We now have a tool for even with living trust for avoiding probate on your home called a lady bird deed.

The point about that story is her home is owned by her trust. Good news, it's not going through probate, but a lot of people out there who have living trusts, their home is not owned by their trust. Therefore, they think that they're not going through probate but their home is going through probate. If you want some advice on how to avoid that or check into it, see if your home is owned by your trust, all you have to do is call us on the phone because we can go right on the internet and answer the question for them.

Chrissy: Many times, Tom, you will talk to people over the phone and I will as well and we are able to answer that question very quickly for them by taking a look in public records.

Attorney Tom Olsen: Yes. Very good. If you want some information about avoiding probate or you want a free initial consult for us to talk about your will or living trust, hey, call us at our office. We'd be happy to assist you. The office phone number is 407-423-5561.