Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client wants to name a trust that is inside of his will as the beneficiary of his life insurance policy.  How is that done?

Answer: A trust created inside of a client’s last will is referred to as a testamentary trust.  It’s testamentary because it doesn’t come into existence until the client’s death.

When trusts are owners or beneficiaries of life insurance policies, the life carriers usually want the trustee—the person acting on behalf of the trust—to be specifically named as owner or beneficiary, acting in his or her capacity as trustee.  You can’t usually predict with certainty who will be the trustee of a testamentary trust at the time it comes into existence, so the company will need to be satisfied another way.

Each life carrier has its own preferred language for beneficiary designations, so it’s best to consult them for a reliable answer.  However, this generic testamentary trust language should work in most cases:

The trustee of the testamentary trust created in Section (section number) of my last will dated (date).

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.