Why Set Up A Life Insurance Trust? 
Some people set up life insurance trusts to transfer the money out of their estate , so that their heirs will not have to pay estate taxes on the life insurance proceeds -LRB- if the estate is over the amount exempt from estate taxes -RRB- . This is called an irrevocable life insurance trust and it transfers ownership of the policy to the trust . Some people use Life Insurance Trusts to give money to charity , fund their child 's or grandchild 's education , or distribute funds to their beneficiaries in the manner they best see fit . 