An Insurance Trust
When people buy a life insurance policy, they generally name their spouse as the primary beneficiary. They can also name their children as the alternate beneficiaries or they might name the estate as the beneficiary.
If they name the estate as the beneficiary, the insurance money will attract probate fees or estate administration tax because the money becomes an estate asset. If children are entitled to receive the insurance proceeds as beneficiaries and if the children are under 18, the insurance company will hold it in trust until then. However, at 18 they will pay them the total of the insurance benefits.
Most of my clients don’t want their children to inherit a large amount of money at such a young age, so they will set up an insurance trust in the will for that insurance policy. In other words, a trustee of the insurance proceeds is named and that individual administers those funds on behalf of the children. Depending on the wording of the trust, the children do not get a vested interest in the money until they are older, for example 21 or 25 years of age. The will can authorize the trustee can make discretionary payments for the benefit of the children before they reach the required age specified in the will.
If you, or someone you care about, is dealing with estate law issues in the Markham, Ontario Region, contact Charles B. Ticker for a consultation.