When a trust is the beneficiary of a life insurance policy, who manages the policy proceeds?

When a trust is named as the beneficiary of a life insurance policy, it is the responsibility of a trustee to manage the policy proceeds. The trustee is a person or entity designated specifically to handle the management and distribution of the assets held within the trust according to the terms outlined in the trust document. This includes overseeing the life insurance proceeds upon the death of the insured.

The trustee’s role is crucial because they act in a fiduciary capacity, meaning they are legally and ethically required to act in the best interest of the trust's beneficiaries. This can involve decisions about how to allocate the funds, whether to disburse them immediately to the beneficiaries or invest them for future benefit, and how to ensure that the trust's conditions are met.

In contrast, other potential beneficiaries or parties mentioned, such as the policyowner or legal representatives, do not have the authority or responsibility to manage the proceeds when a trust is involved. The insurer will pay the proceeds to the trustee, as dictated by the terms of the trust, ensuring that the processes are handled according to the established trust management guidelines.