After taking out Life insurance you can place it in Trust. The Trust is a document provided by your advisor or insurer at no additional cost and its purpose is to ensure that the proceeds of your policy are used as you intended.
Few people write their policies in Trust, but most should! The main benefits are significant:-
- Control: You can specify exactly who should benefit from the life insurance money and how it should be paid.
- Minors: The proceeds of any claim can typically be held in trust until the chosen beneficiary is eligible to receive them, for example when they reach a certain nominated age.
- Faster payment of the money: Using a trust should help to ensure that the money paid out from your life insurance can be paid out to the people of your choice quicker. This is because there is no need to wait for probate to be granted.
- Avoiding Inheritance Tax: When a life policy is not held in trust, it will normally be considered part of the estate meaning it can be subject to Inheritance Tax. Using a trust should mean that the policy is not part of the estate and should therefore not be subject to Inheritance tax.
Beware, most Trusts are linked to a specific policy number, and where there are no other assets to distribute, any changes or cancellations to the policy will automatically dissolve the Trust and mostly without notification. This means that whenever changes are recommended, the linked Trust will also be reviewed.