Legal Question in Tax Law in California

Re: Insurance beneficiary

Not from an income tax perspective, if the trust proceeds were non-taxable before, then paying them to the trust will not cause them to become subject to income tax. Unless you have a very unique situation that I am not familiar with.

That being said, what you should be concerned with is Estate Taxes. If either A). your or your revocable trust are the owner of the insurance policy at your death or B). your revocable living trust is named as the beneficiary of the insurance policy... then those proceeds could be subject to estate taxes (inheritance taxes), where otherwise they would not. Unless you have a customized trust that took into account this specific scenario, then you should not have the revocable living trust or yourself either be the beneficiary of the policy or the owner of the policy.

Of course this depends on the size of your estate and whether you have someone else who would be a good candidate for the policy. I should also add, that an ILIT (Irrevocable Life Insurance Trust) can be created to deal with these specific issues.