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16 Cornell L. Q. 19 (1930-1931)
Personal Life Insurance Trusts in New York

handle is hein.journals/clqv16 and id is 35 raw text is: PERSONAL LIFE INSURANCE TRUSTS IN NEW YORK HENRY S. FRASER* INTRODUCTORY The well-known danger of placing a large lump sum of money in the hands of an inexperienced widow is perhaps the greatest con- tributing factor to the phenomenal spread of the personal life in- surance trust idea. By such a trust many a husband is arranging for the proceeds of his life insurance to be paid to a local trust company and administered by it after his death according to a plan outlined in the trust instrument. In this way the money is scientifically invested and the income paid to the widow and children at convenient inter- vals according to the terms of the trust agreement. The trust in- strument will also provide for the ultimate disposition of the principal, and it may contain special features dealing with advancements of principal to meet emergencies, the expenses of an education, etc. In order to create such a trust the insured may either name the bank as the trustee-beneficiary in the policies, or he may assign the policies to the bank. At the same time that the policies are delivered to the bank, an instrunent is prepared and executed by the parties in which the manner of administering the proceeds of the insurance is set forth. On occasion the insured also transfers to the trust company securities of an income-producing nature and directs in the instrument that the bank shall hold such securities in trust during his lifetime and use the income to pay the premiums on the policies. the instrument will also provide for the disposition of the income- producing property after the death of the insured. This last stated trust is known as a funded trust. The vast majority, however, of personal life insurance trusts are unfunded, i. e., no income-producing property is transferred to the bank during the lifetime of the insured, the insured continues to pay the premiums although the possession of the policies may be given to the trust company. I. THE NATURE OF PERSONAL LIFE INSURANCE TRUSTS (a) Unfunded trust where policies are not assigned. Resolved into its essential parts and irrespective of the labels and phraseology customarily employed, what is a personal unfunded life insurance trust? During the recent rise of this type of trust, many perplexing questions have been asked about its legal incidents. The *Member of the firm of Brown, Fraser & Black, Syracuse, N. Y.

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