I am beneficiary on a life insurance trust. If I withdraw my portion, what affect will it have on my siblings?

Question

Me and my siblings are beneficiaries of a life insurance trust and I really don't want anything to do with it. Money has been paid into the trust to buy life insurance and we all have the option to withdraw our portion of that money. If I exercise my right, the trust won't have enough money to buy the policy that it had planned to. Will the trust be able to buy a less expensive policy for my siblings or will I kill the whole trust by withdrawing my portion? Please feel free to ask any clarifying questions. Kevin

Answer 1

You probly would not be able with draw any money.   If the owner of the life insurance policies is the trust, and it probly is, you can not withdraw any money, only the trust or trustee can.

You should call the insurance company and ask them who needs to sign to get any money out.  

Is there only one insurance policy?  Whose life is it on?   Are there several life insurance policies on each one of you?

To get the correct answers to your questions you need to answer these questions.

Answer 2

Well, one life insurance policy isn't going to cover ALL the siblings.  Each sibling has to have their own policy purchased.  So yes, you can take yourself out, without hurting the siblings.  

Also, if you allow the trust to purchase a life insurance policy on your life, then the trustee gets to pick who gets the money if you die - NOT YOU.   So for most people, they don't like that much!!

Answer 3

Yes, they will be royally pi$$ed at you.  If the trust is set up to pay estate taxes, you would be a fool to pull the money out because you would still owe taxes on the property you receive when the grantor dies (unless they just exclude you from the inheritable property, which they might be able to arrange).  If it is set up just because someone thinks you're special, talk with the grantor (this is probably your parents, I'm guessing) and the trustee about receiving your annual gift now instead of delaying gratification.  It might still be difficult to cut you out of the trust because trusts are supposed to be managed for the benefit of the beneficiaries.  Expect some legal fees.  

I'm guessing there is a life lesson in there somewhere about good things coming to those who wait.  If you still think it's smart, talk with a fee-only financial advisor about taking the money now v. later.

Interestingly, you said you "don't want anything to do with it," but you still asked about taking the money.  It seems that you do want something to do with it, but the present value seems higher to you than the future value.

edit: It might be possible if the trust allows that.  The simplest solution is to leave the money alone and give it away when it comes.  Because you are currently a beneficiary of the trust, he is able to gift more to the trust each year (You have to have the right to withdrawal any gifts made to the trust in your name each year or else the gift isn't considered irrevocable).  If you really want to mix with the formula, you should talk to your siblings, trustee, lawyer, and insurance agent before doing anything.