Life Insurance Trust Law and Legal Definition

An irrevocable trust created during the lifetime of a trustor to hold his/her life insurance policy as trust property, and thus exclude its proceeds from the taxable estate upon his/her death. Once the life insurance policy is placed in the trust, the insured person no longer owns the policy, which will from then on be managed by the trustee on behalf of the policy beneficiaries when the insured person dies. Upon the death of the insured, the Trustee invests the insurance 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. If the trust owns "second to die" or survivorship insurance which only pays when both spouses are deceased, only the children would be beneficiaries of the insurance trust. A Life Insurance Trust is also known as Insurance Trust.