Also known as: Insurance Trust
Written by attorneys · grounded in primary & secondary sources — see below
A trust that holds one or more life insurance policies on the life of the settlor or another person. The policy may constitute the trust's sole asset, rendering the trust unfunded until the insured's death, or the trust may hold additional assets that render it funded.
Valerie created an unfunded life insurance trust naming her siblings as remainder beneficiaries and Erin as trustee. She later executed a will devising her residence to the trustee of that trust. Valerie then signed a revocation document and placed it in a drawer without notifying Erin. After Valerie's death, the revocation caused the devise to lapse, so the residence passed through the estate rather than to the trust.
Williams executed declarations stating that he held life insurance policies in trust for Farkas. The policies named Williams as owner and Farkas as beneficiary. After Williams died, Farkas claimed the policies belonged to an inter vivos trust rather than Williams's estate. The court examined whether the declarations created a valid trust with the policies as res.
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Yes. Under the governing statute, revocation or termination of the trust before the testator's death causes the devise to lapse unless the will provides otherwise. The will must contain explicit language overriding the lapse rule for the property to pass to the trust.
Supporting sources
Yes. The statute expressly permits a devise to the trustee of a trust established during the testator's lifetime or to be established at death, including unfunded life insurance trusts, when the will identifies the trust and its terms appear in a separate written instrument executed before, concurrently with, or after the will.
Supporting sources
No. The statute provides that a devise to such a trust remains valid even if the trust is amended after execution of the will or after the testator's death. The property becomes part of the trust and is administered under the governing instrument as amended.
Supporting sources
…to the trustee or trustees of a trust established or to be established by the testator . . . including a funded or unfunded life insurance trust, although the trustor has reserved any or all rights of ownership of the insurance contracts, if the trust is identified in the will and the terms of the trust are set forth in a written…