Why should a life assurance or pension policy be written in Trust?
1. Beneficiaries
The life assurance or pension proceeds can be paid directly to the intended beneficiaries.
2. Tax
The life assurance or pension value is paid to the intended beneficiaries outside the person's taxable Estate thus saving potential Inheritance Tax.
3. Speed
Beneficiaries can receive the monies before the Grant of Probate has been applied for and received.
4. Flexibility
Under a Flexible Trust beneficiaries can be changed or the circumstances and intentions of the Trust changed.
There are very few circumstances in which a life assurance should not be written in Trust, perhaps the main one though is when life assurances are assigned to lenders, for example for mortgage purposes.
All other policies should normally be written in Trust unless it is advisable for the policy to be held in another way.
Uses of Trust Policies
Most types of life policy can be placed under Trust helping in many circumstances, such as:
- Protection - term assurance and other life assurance policies can
be written under Trust for partners, spouses and children to secure
their future financial security.
- School Fees - policies under Trust where the Trustees use the
monies to pay school fees.
- Partnership Protection - life assurance policies under Trust
payable to other partners in the business providing sufficient funds
to buy the share of the partnership from the deceased's Estate.
- Directors Share Protection - term assurances under Trust
providing surviving directors sufficient funds to buy the deceased
director's shareholding from the Estate.
- Protection from creditors - a trust policy is not owned by a
bankrupt so may not be affected by bankruptcy. Trusts enable
protection to continue despite bankruptcy and are popular for
individuals in business.
- Inheritance Tax Planning - term assurances under Trust can be
used to protect potential exempt transfers and many whole-of-life
assurances placed under Trust are utilised to fund the Inheritance
Tax that becomes payable on death, thus allowing the rest of the
Estate to pass intact to the intended beneficiaries.
- Savings - saving arrangements under Trust which enable monies to be paid outside the Estate to reduce tax bills when the beneficiaries become entitled to the monies.
As part of our service you will be provided with the Life Insurance Company's Trust documentation when you have completed the quotation process. The form will either be part of the download application form or will be e-mailed to you on request. Please send any request to info@GoForCustomer.co.uk . The Trust should be submitted with your application form for life assurance.
If you believe your arrangements to be complex or in any way do not fully understand Trusts and their suitability for your circumstances we recommend that you seek legal advice from a solicitor.
Updating
You should keep in mind that Trusts should be regularly reviewed to fit in with changing individual circumstances and requirements. For example, consideration should be given to:
- Trustees, Settlors or Beneficiaries change of residence or
address.
- Are the Trusts terms and conditions still suitable for the
original intention.
- What are the beneficiaries' circumstances. Consideration for
example as to whether the Trust documentation may interfere with the
person's ability to receive State Benefits, thus ensuring the Trust
provides financial security and does not reduce State Benefit.
- Flexibility - changes in law and taxation may mean that Trustees
need professional advice and added flexibility to make the most
advantage of circumstances.
- Trustees responsibilities - when do you want your Trustees to
distribute the assets held within the Trust. Should merely a lump
sum be provided or should the Trustees control distribution of
capital to fund education or a wider discretion of requirements. In
the case of minor children, should the Trust assets be held to a
certain age or used for suitable expenditure such as education,
marriage and house purchase.
- Suitability of Trustees - you may need to review who the Trustees
are as relationships change with individuals. Professional Trustees
such as solicitors and accountants may also change as retirements
occur and successors are appointed.
- Trust Documentation - this is a very important key document, along with the policy document or schedule and then appropriate safe storage of those documents should be sought.