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Record-setting insurance purchase shows smart estate planning

On Behalf of | Mar 21, 2014 | Trust Administration |

Not long ago, a world record was broken in the state of California. No, it wasn’t something as flashy as a land-speed record, but it is a smart one according to observers. By purchasing a life insurance policy worth $201 million, a California tech mogul smashed the previous record by $101 million.

Even though the specific identity of the insurance policy holder hasn’t been revealed, observers have been able to offer some insight. Including an insurance policy in a trust can prove to be a very effective estate planning tool, as it provides financial assets to beneficiaries while minimizing the tax burden.

There may be a perception that trusts are an estate planning instrument only useful for wealthy individuals and their beneficiaries. The reality, however, is that anyone could potentially stand to gain from including a trust funded by a life insurance policy in his or her estate plan. Beyond tax advantages, trusts also allow individuals to administer assets to loved ones in a specific, controlled manner.

It’s worth noting that a life insurance policy might be among a person’s most valuable assets. In fact, this might be true for people who aren’t considered to be “wealthy.” Keeping this in mind, people may want to make sure this type of asset is protected for the benefit of loved ones who are named in an estate plan.

Setting up a life insurance trust certainly might be good idea, but it can also be very complicated to arrange. As such, it may be helpful to discuss this option with an experienced attorney and ensure that it’s created in the most effective and clear way possible.

Source: CNBC, “Tech billionaire buys $201 million insurance policy,” Robert Frank, March 17, 2014