Life Insurance vs. Trusts

A life insurance policy is normally a component of a wealth protection strategy. There are usually many components including legal, investments, use of trusts, cash flow/borrowing needs and tax planning to be considered.

A properly structured life insurance policy will differ from a trust and may have the following general characteristics: Tax deferral and potentially tax free, simplified reporting, no trustee and in asset protection.

A properly structured trust can provide asset protection, but it must have a third party “trustee” with full control, stringent reporting requirements, tax filings for trust and possibly beneficiaries and limited or no tax deferral.