Sarah, a 35-year-old entrepreneur in Ontario, owns a successful tech startup. She is married to David and has two young children. Sarah wants to ensure that if she passes away, the proceeds from her significant life insurance policy are held for her children's education and well-being until they reach adulthood, without immediately becoming part of her estate and subject to probate. Which of the following is the most appropriate recommendation for Sarah to achieve this goal?

Question: Sarah, a 35-year-old entrepreneur in Ontario, owns a successful tech startup. She is married to David and has two young children. Sarah wants to ensure that if she passes away, the proceeds from her significant life insurance policy are held for her children's education and well-being until they reach adulthood, without immediately becoming part of her estate and subject to probate. Which of the following is the most appropriate recommendation for Sarah to achieve this goal?

Answer options: ✅ Establish an insurance trust, naming the trust as the beneficiary of her life insurance policy.

• Designate David as the revocable beneficiary, with a verbal agreement to manage funds for the children.
• Designate her children as irrevocable beneficiaries directly on the insurance policy.
• Designate her estate as the beneficiary and include testamentary trust provisions in her Will.

Correct answer: Establish an insurance trust, naming the trust as the beneficiary of her life insurance policy.

Explanation: An insurance trust (inter vivos trust) allows the policy proceeds to be paid directly to the trust, bypassing the estate and probate, and ensuring the funds are managed for the children's benefit according to Sarah's instructions.