The benefits of writing your life assurance policies in trust
Writing life insurance in trust is a great way to protect your family’s finances in the event of your death.
Your life insurance policy is a significant asset and may even be the largest part of your estate when you die.
By putting life insurance in trust, you can control the way your beneficiaries receive their inheritance, reduce the amount of time it takes for them to receive the funds, and ensure that the proceeds are free from inheritance tax.
What is a trust?
Trusts are an ancient legal arrangement that date back to the twelfth century. Despite their historic connections, modern trusts are relatively straightforward, and in the context of life assurance, they allow an individual to leave money to their chosen beneficiaries when they die.
A trust is managed by the individuals that you choose to be trustees, until the proceeds are paid out to the beneficiaries.
This often happens soon after your death, but may be on a specified future date, such as when a child turns 18.
Who can be a beneficiary?
Your beneficiaries can be whoever you choose and will be dictated by your personal circumstances and wishes. For example, you may choose:
· Your spouse or partner
· Your children or grandchildren
· A relative or friend
· A charity
What are the benefits of writing life assurance in trust?
There are many reasons why individuals choose to place their life assurance in trust, but the principal motivations are:
· You can specify exactly who you want to receive your money and when.
· The pay-out is often faster because money held in trust doesn’t need to go through probate.
· The money that’s paid out is usually free from inheritance tax.
Are there different types of trust available?
Yes, there are a variety of types of trust and it’s really important that you use the right one for your circumstances and wishes.
Speak to one of our financial planners about which trust is right for you.
How much does it cost to place a life policy in trust?
Nearly all life assurance providers allow you to place your policy in trust, free of charge, at any time. This can be when you take out new cover and even for policies that are already in place.
Most insurers will provide you with the necessary forms, but we strongly recommend you seek the assistance of a financial planner when completing the paperwork.
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Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. You should review the level of cover required on a regular basis to ensure that it keeps in line with your earnings, otherwise, cover may be less than you need. If any relevant information provided, when applying, is not disclosed accurately and honestly, this could result in any cover offered becoming invalid and / or may result in the non-payment of any future claims.
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