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Life insurance proceeds will be included in the estate if such proceeds are payable to the...

Life insurance proceeds will be included in the estate if such proceeds are payable to the estate or are available to pay taxes, debts or other expenses or charges of the insured's estate. Given this fact, how can life insurance trust help provide liquidity to the estate and yet avoid inclusion in the taxable estate?

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Expert Solution

life insurance trust:

A life insurance trust is an irrevocablenon amendable trust which is both the owner and beneficiary of one or morelife insurance policies.Upon the death of the insuredd the trustee invests the insurance proceeds proceeds and administers the trust for one or more beneficiaries. If the trust owns insurance on the life of a married person the non insured spouse and children are often beneficiaries of the insurance trust.

liquidity to estate :

Life insurance proceeds can be used to pay debts, taxes and other estate costs so that estate assets, such as registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs) are not eroded to pay these expenses. Capital gains tax, tax associated with registered plans, estate taxes and probate fees can all be covered by life insurance.

need and importance of life insurnce :

Life insurance plays a vital role in estate planning, including preserving the value of your estate, providing financially for dependants or a surviving spouse, and ensuring money is available to pay for any taxes, fees, or other outstanding debts upon death.

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ekkarill92 answered 1 year ago
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