How can an insurance trust benefit a policyholder's beneficiaries?

The benefit of an insurance trust for a policyholder's beneficiaries lies in the way the death benefit is managed and distributed according to the terms laid out in the trust. When a life insurance policy is placed in a trust, the policyholder can specify how and when the death benefit should be paid to the beneficiaries. This can provide greater control over the distribution of funds, ensuring that the beneficiaries receive the money in a way that aligns with the policyholder's wishes.

For example, a policyholder might want to restrict access to the funds until beneficiaries reach a certain age or to allocate funds for specific purposes such as education or healthcare. This arrangement can prevent mismanagement of the funds, offering financial security and peace of mind both for the policyholder and the beneficiaries.

The other options do not accurately reflect the primary purpose of an insurance trust. Reducing the overall policy cost is not a direct benefit of establishing a trust since the costs may remain the same. The elimination of the need for a medical examination is unrelated to the function of a trust; rather, it pertains to other factors, such as the type of insurance being obtained. Lastly, an insurance trust does not inherently increase the cash value of the policy. Instead, it focuses on how benefits are distributed after