A trust is an incredibly valuable and versatile tool to accomplish many of your estate and business planning objectives. Basically, you create a separate legal entity that owns and administers property for the benefit of certain beneficiaries. One or more trustees are appointed to administer the trust pursuant to the document's precise instructions. They must adhere to the instructions at the risk of being held personally liable. That's why Trustees are called fiduciaries, because they are subject to a higher standard of care in exercising their duties. Because they are separate legal entities, they do not "die". In fact, they can last up to 360 years in Florida!
Since they can own virtually any type of property, trusts ensure a smooth transition of family and/or business assets or wealth to subsequent generations while still exercising a fair amount of control over the property far beyond the time of death. Additionally, trusts are employed in connection with estate and gift tax reduction strategies. Where they are relevant to everyone is how helpful they are in avoiding probate and avoiding guardianship, which as you now know, can be very time consuming, expensive, not private and dangerously unpredictable.
There are many types of trusts, with each having unique advantages and disadvantages. Some are excellent for simple estate planning. Others are useful for estate and gift tax planning. Still others can be used for current and deferred charitable giving. Finally, trusts are excellent vehicles to integrate into an asset protection plan, thereby taking advantage of both estate planning and asset protection techniques planning simultaneously. Given how powerful trusts can be, you have to ensure that they are carefully drafted. Small mistakes often have dangerously large consequences. We strongly advise you to retain the services of an attorney that focuses exclusively on wills, trusts and estates, and avoid do-it-yourself products and services at all costs.
A life insurance trust generally owns a life insurance policy or policies and also serves as the beneficiary of the policy. If structured properly, it may have some estate and gift tax benefits. If structured or administered improperly, it may trigger additional unnecessary estate and gift tax consequences. You should definitely consult an estate planning attorney in order to ensure that it's done correctly.