Trusts and your options?


What is a trust?

A trust is a way of putting something valuable (an asset) aside to benefit others. In this case the value of your Life Assurance and Protection Policy. The trust stops the money being used for any other purpose and ensures it goes to the people you want it to go to, when you die. These people are known as the beneficiaries.

Who’s involved?

  • The settlor – they create the trust and initially own the policy (you, if it’s your policy).
  • The trustees (of which the settlor may be one) – look after the trust’s legal requirements. They’re also considered the legal owners of the policy.
  • The beneficiaries – those who benefit from the Life Assurance and Protection Policy payment when a claim is made.

Why should I use a trust?

  • When you die the courts have to give permission for assets in your estate to be given to your beneficiaries. This takes time and if you die before making a will it can take even longer. However trustees don’t have to wait for courts so your life assurance and protection payment can be made as soon as possible
  • If your life insurance isn’t under trust it automatically becomes part of your estate, which could increase the chances of inheritance tax being due. Putting your policy under trust may mean that inheritance tax can be avoided.
  • A trust means your money goes to the people you intended. For example, if you owed money when you died a trust could mean the money paid out under policy would go to your loved ones not your creditors.
  • Trustees could use a trust to support your children, once your children have turned 18 they can have full access to the trust fund.

Can any policy be in trust?

Generally any policy can be written in trust, but some shouldn’t be. For example, if the insurance has been arranged to cover your mortgage and not provide money for your dependants.

Can I change my mind?

Once set up, it can’t usually be cancelled. It is possible if all the beneficiaries agree but it is difficult. You should be certain that a trust is right for you before you set it up.

Do I need advice?

We can provide trust documentation but you should seek legal advice to ensure our trust wording is suitable, and if you need any additional information.

What next ?

If you’d like to set up a policy and put it in trust, during completion of the product provider’s application you should tick yes to the policy being placed in trust. You will need the following minimum information for the product provider:

  • The name of one or two trustees, in addition to yourself.
  • Names of the beneficiaries (there must be at least one).
  • The percentage of the Life Assurance and Protection payment you’d like each beneficiary to receive (shares must add up to 100%).
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