What is a split trust in the context of life insurance?

A split trust in the context of life insurance refers to an arrangement where the benefits of the insurance policy are divided between the policyholder and their chosen beneficiaries. This structure allows for a greater degree of control and flexibility over how the policy’s proceeds are distributed upon the death of the insured. By implementing a split trust, the policyholder can designate different beneficiaries for different aspects of the benefits, ensuring that certain conditions or stipulations are met before the beneficiaries receive their portion. This can be particularly useful for estate planning, as it allows individuals to provide for dependents while also considering tax implications and the management of assets over time.

The other options, while related to different aspects of life insurance, do not accurately describe what a split trust entails. For instance, the description of a type of trust that restricts access to funds until a certain age focuses on limitations rather than the division of benefits. Similarly, a policy that combines life insurance with investment options and one that pays out only upon death pertain to different structures and functions of life insurance policies, rather than the specific arrangement of benefit allocation found in a split trust. Therefore, the definition provided in the first choice aligns correctly with the concept of a split trust in life insurance.