Trusts

Getting money to the right people

WHY USE A TRUST?

Placing your life assurance policy in trust is one way of helping make sure that your life assurance policy is given to those you want it to go to, without unnecessary delays. A trust allows the policy proceeds to be given away for the benefit of others (the beneficiaries). This is done without giving the beneficiaries full control or access to the proceeds.

WHO’S INVOLVED IN A TRUST?

The settlor – the person giving away their life policy is called the settlor. The settlor chooses the trustees and the beneficiaries.

The beneficiaries – the people who can receive payment from the trust fund are called the beneficiaries.

The trustees – the trustees take legal ownership of the trust fund from the settlor. They then look after the trust fund, and, following a claim on the policywill make arrangements for the payments to be made to the beneficiaries.

The main reasons for putting a life assurance plan into a trust

1. It makes sure that the money paid out from the plan goes to the people the settlor wants to benefit from it.

When a trust is set up, the settlor lists all the people they want to share the money from the trust. The settlor can even indicate what proportion of the money they would like each individual to receive – for example John 25%, Jane 25% and Mark 50%.

2. The life insurance company can usually pay a death claim more quickly than they could if it were not put in trust.

If a life assurance plan is in trust, it is no longer part of the settlor’s estate. So if they die, the trustees claim on the life assurance and the death benefit money is paid directly to the trustees. If a life assurance plan is not in trust, the amount of money a person has as life assurance is added to the rest of their estate if they die during the plan term. This means that the people that are to distribute the estate would need to get a grant of probate before the insurance company could pay out any money. This can take several months or years.

3. The money the plan pays out may potentially be free of inheritance tax.

So, if you’re planning on taking out protection with us, we can put it in trust. It could prove to be priceless.

If you would like advice on setting up a trust we can refer you to one of our specialist partners who will be more than happy to give you advice and help with your enquiry.