Why would I put my life insurance policy into a trust instead of just naming beneficiaries?

For most families, naming beneficiaries directly is fine and the payout avoids probate. But for larger estates, life insurance proceeds you own are included in your taxable estate, even though beneficiaries receive the cash income-tax-free. An irrevocable life insurance trust (ILIT) owns the policy so the death benefit sits outside your estate, potentially saving significant estate tax.

A trust can also control how proceeds are used, useful if beneficiaries are minors, spendthrifts, or you want funds spread over time rather than paid in a lump sum. The trade-off is complexity: the ILIT is irrevocable, must own the policy (or you must survive three years after transferring an existing one), and requires annual administration. Only worth it if you have estate tax exposure or specific control needs.