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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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