Life Assurance

Trusts

Placing your life insurance policy in trust for your family ensures that the payout on the death of the life assured is not delayed and may prevent the plan proceeds from being subject to inheritance tax. Upon a claim the sum is paid directly to the trustees who then forward to the beneficiary. It does not become part of your estate. Usually the policy is written under trust at the outset however, it is possible to place existing life insurance policy under trust at a later date.

The funds are paid without the need for Grant of Representation, normally within a matter of days after production of the death certificate. You may also be able to amend the beneficiary and appoint new trustees during the term of your policy.

For many people, the amount of their life insurance when added to the value of their home takes them over the threshold for Inheritance Tax liability. This means that your family could be charged Inheritance Tax on a lump sum which is designed to assist them financially in the event of your death.

You can opt to place your life insurance policy in trust, unless it is assigned for example, to a mortgage lender as security.

It also allows you to specify who benefits from the sum assured, there is normally no cost to placing your policy in trust. You will be sent a Trust Deed form to set up and register your trust.

In creating the trust you are known as the settler and you will need to appoint two trustees who will ensure that the funds are distributed to the beneficiary (ies) in accordance with your wishes. There are a number of different types of Trust available, however, those most commonly associated with a life insurance policy are:

The Flexible Trust

This is a basic trust for family protection or protecting against inheritance tax. You select your chosen beneficiary and appoint trustees at the outset. You are able to amend these if your circumstances change.

The Split Trust

This type of trust is suitable for life insurance policies that include both death and critical illness benefits and may help to protect the proceeds of a life assurance policy from inheritance tax. It allows for the death benefit to be given to a specified beneficiary whilst you retain the rights to the critical illness cover in the event of you suffering a critical illness.



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