Life Insurance Trust Funding Agreement Template

What Is the Life Insurance Trust Funding Agreement?

This agreement governs the relationship between you (the grantor) and your trustee regarding life insurance policies held in an irrevocable trust. It documents the initial transfer of policies from your name into the trust's ownership, establishes your commitment to make annual premium contributions, and creates temporary withdrawal rights for beneficiaries that allow your gifts to qualify for the annual gift tax exclusion. The agreement also defines how the trustee will administer policies, maintain records, send required notices to beneficiaries, and coordinate with insurance companies.

Life insurance trusts are designed to remove death benefits from your taxable estate, potentially saving your family hundreds of thousands in estate taxes. But without proper funding documentation and Crummey withdrawal provisions, your contributions may not qualify for annual exclusions—meaning you'll consume your lifetime exemption faster than necessary or trigger immediate gift tax liability.

 

 

Is This Life Insurance Trust Funding Agreement Right for You?

You need this agreement if you're:

• Transferring existing life insurance policies into an irrevocable trust
• Purchasing new life insurance to be owned by a trust
• Making annual premium contributions that you want to qualify for gift tax exclusions
• Setting up an irrevocable life insurance trust for estate tax reduction
• Coordinating with a trustee who will manage insurance policies
• Creating withdrawal rights for trust beneficiaries to preserve annual exclusions

You definitely need this agreement if:

• Your estate exceeds the federal estate tax exemption threshold
• You're contributing more than $18,000 annually per beneficiary without proper exclusion documentation
• Your trust holds multiple life insurance policies requiring coordinated premium funding
• You've already transferred policies but haven't documented the funding arrangement
• You need to prove to the IRS that beneficiary withdrawal rights were legitimate

 

Why Thousands Trust Legal GPS Templates

Save Money: Estate planning attorneys charge $2,000-5,000 to draft life insurance trust funding agreements and Crummey notice provisions.

Save Time: Download immediately and customize in under an hour with guided blanks and choice options.

Look Professional: Attorney-quality language ensures insurance companies and the IRS take your documentation seriously.

Keeps You Out of Court: Comprehensive Crummey Withdrawal Rights provisions protect your annual gift tax exclusions and create defensible IRS audit trails, while Transfer of Life Insurance Policies articles document ownership changes that remove death benefits from your taxable estate.

 

 

 

Get Protected in 3 Simple Steps

Step 1: Secure Checkout

Complete your purchase through our encrypted payment system. You'll receive instant access to your template.

Step 2: Instant Download

Download your life insurance trust funding agreement immediately as a fully editable document.

Step 3: Fill In the Highlighted Fields

Open the template and complete the bracketed sections with your policy details, funding schedule, and Crummey withdrawal provisions. Our comprehensive guide walks you through every complex decision point.

 

Frequently Asked Questions

Can I use this template multiple times?

Yes. Once you purchase the template, you can use it for multiple life insurance policies and trusts. Customize it each time for different policy transfers or funding arrangements.

Is this contract legally binding?

Yes. This is an attorney-drafted agreement that creates enforceable obligations between you and your trustee. When properly executed with all required signatures, it governs the funding and administration of life insurance policies held in trust.

What's the difference between this and the trust document itself?

Your trust document creates the trust and defines how assets will be managed and distributed. This funding agreement is a companion document that specifically addresses life insurance policy transfers, premium contributions, and the Crummey withdrawal rights needed to preserve gift tax annual exclusions. Most trusts need both documents.

Do I need separate Crummey notices for each contribution?

Yes. Every time you make a premium contribution to the trust, the trustee must send written notice to each beneficiary informing them of their temporary withdrawal right. This agreement requires the trustee to maintain proof of these notices as your IRS audit protection.

Can I transfer policies I already own into the trust?

Yes, but understand the three-year rule. If you die within three years of transferring an existing policy to an irrevocable trust, the IRS includes the death benefit in your taxable estate under Section 2035. For maximum estate tax protection, either purchase new policies directly in the trust's name or transfer existing policies and live at least three years.

What happens if I stop making premium contributions?

The agreement preserves your right to discontinue funding without the IRS claiming you retained a taxable interest in the trust. The policies remain in the trust but may lapse if there's insufficient cash value. Your trustee should notify you before any policy lapses due to non-payment.