PSI Life Exam Practice Test 2026 – Complete Preparation Resource

The primary purpose of an insurance trust is to hold life insurance policies outside of the insured’s estate. This structure is crucial for estate planning, as it helps ensure that the death benefit from a life insurance policy is not included in the insured’s taxable estate upon their death. By using an insurance trust, the policyholder can effectively manage the distribution of the policy's proceeds to beneficiaries while potentially reducing estate taxes. The trust becomes the owner of the policy, and since life insurance proceeds can significantly impact the size of an estate, this arrangement helps to ensure that beneficiaries receive the benefits in a timely manner and according to the policyholder’s wishes.