According to some estimates, as few as 6% of life assurance policies in the UK are currently written in the form of a trust, although doing this can be advantageous.Clients should always consider whether a new policy needs to be written in trust and a review of any other existing policies might reveal how those could be made more beneficial. Many people may accumulate several life assurance policies, each one written for a purpose, but once written, just allowed to run. The opportunity to review life assurance policies is an important aspect of any financial health check, when the possibility of putting life assurance policies into trust should not be overlooked.What are the financial planning advantages to writing life assurance policies in trust? There can be three key benefits:
- On death, policies held in trust are paid out without having to await probate, so dependants get the benefits straight away.
- The policy proceeds do not add to the estate for inheritance purposes, thus avoiding paying tax unnecessarily.
- The client has control over who is to receive the benefits.
Trusts might seem complicated, but with advice are relatively simple to negotiate and understand. The first thing to remember with any trust arrangement is that three groups of people become involved – the settlors, the trustees and the beneficiaries. The settlor is the client who is putting their policy into trust. The trustees are the legal owners of the trust property and are responsible for managing the trust according to its rules. The beneficiaries are those that are to receive the benefits from the policy.The second aspect to consider is what type of trust to use. Again advice is helpful when considering and choosing trust options. Commonly there are three types of trust used with life assurance protection – a bare trust, a discretionary trust and split trusts, offering choices in terms of how the client wants to plan their financial future and provision.So if you are thinking about taking out a life assurance policy, think about it being in trust and it’s not a case of just setting up your policy and leaving it. Be concerned to review your policy holdings and make sure that you paying for the best possible coverage and outcomes.If you want to find out more about your life assurance cover, contact one of the team who will be happy to help or forward this eNewsletter to a friend who may benefit from our services.Source: www.hmrc.gov.uk