A life insurance trust is often named the beneficiary of the life insurance poli

Question

A life insurance trust is often named the beneficiary of the life insurance policies it holds for which of the following reasons?

          I       It can provide greater flexibility than is available under insurance settlement options.

          II      It can eliminate a second estate tax upon the death of the beneficiaries.

    III     It can incorporate special limitations and restrictions on the funds designed to be paid to specific beneficiaries.

A.      I only

B.      I and II only

C.     II and III only

D.     I, II and III

Explanation / Answer

ANSWERE :

A. I only ( It can provide greater flexibility than is available under insurance settlement options.)

because If you name an individual as beneficiary of a policy and that person is incapacitated when you die, the court will probably take control of the money. Most insurance companies will not knowingly pay to an incompetent person, and will usually insist on court supervision. But if your trust is beneficiary of the policy, the trustee can use the proceeds to provide for your loved one without court interference.

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