Estates do not have to be consumed by taxes. For many, the solution may be a life insurance trust.
A trust is a legal agreement between two parties: the person who creates the trust and the person, institution or independent trust company responsible for administering the trust, known as the trustee. The trustee manages the assets placed in the trust for the benefit of the third person, the beneficiary.
A life insurance trust allows the trustee to purchase a life insurance policy on the life of the person who owns the estate. Usually, the trust is the beneficiary of the policy.
The proceeds from a life insurance trust are used to pay taxes, legal fees, probate costs and other liabilities when the person who created the trust dies. When all of these debts are paid, the trustee distributes the remaining proceeds to the beneficiaries of the trust, according to the instructions in the trust.