4.5.1 Trusts
The word "trust" is based on confidence and relies on promise. When a policyowner names a beneficiary through a trust, the owner is confident that the promises (benefits) made by the policy will be carried out as designated. Trustees have the fiduciary responsibility of making sure those promises are kept.
John wants to purchase a life insurance policy for $500,000 and name his wife, Kasey, as beneficiary. However, he's afraid that Kasey may not know how to handle a windfall like that, and she may not be able to make it last for the rest of her lifetime. John decides to set up a legal trust in which she will receive a sufficient amount each month. He appoints a trustee whom he "trusts" to oversee and handle the funds held in trust for Kasey, and she is protected from creditors of the insured's personal debts and liabilities.
