Life Insurance in Trust with Assured Protect: Supporting you, and your beneficiaries via effective insurance Trusts.
In the UK, a flexible life insurance trust is a type of trust used to manage the proceeds of a life insurance policy. It gives the trustees discretion over how and when to distribute the money to the beneficiaries, offering flexibility and control for estate planning and inheritance tax (IHT) efficiency.
Key Features of a Flexible Life Insurance Trust (UK):
Feature
Discretionary Trust - Trustees can decide which beneficiaries receive funds, when, and how much.
No IHT on Proceeds - If properly structured, the life insurance payout is outside your estate for IHT.
Avoids Probate - If properly structured, the life insurance payout is outside your estate for IHT.
Funds are paid directly to the trust, speeding up access for beneficiaries.
Description
Settlor - You (the policyholder) set up the trust and often act as a trustee.
Default Beneficiaries - You name "default" or "potential" beneficiaries, but the trustee has final say.
In summary;
Life insurance policies written in Trust helps the policy owner to nominate their preferred beneficiaries, speed up the process of payouts and protect against IHT.
How a Trust could possibly work for you (example);
You take out a £500,000 life insurance policy and write it into a flexible trust.
You name your spouse and children as default beneficiaries.
You also appoint your sibling and a solicitor as trustees.
On your death, the payout goes into the trust.
Your trustees follow your letter of wishes and pay a lump sum to your spouse and hold the rest for your children’s future education and home deposits.
If your estate was being contested in court, delays could occur before your assets are paid out and liabilities paid off. And, maybe a claimant could end up with some of the inheritance too.
A properly written life insurance Trust could mitigate or even fully negate these huge (and possibly very costly) concerns.
Whether you are setting up a new life insurance policy, or you have an existing insurance policy already in place, Assured Protect's Advisers can help you to facilitate the right Trust;
How It Works:
Set up the trust before or at the same time as taking out a life insurance policy.
Assign the policy into the trust (this is called "writing the policy in trust").
On your death, the insurance company pays the benefit into the trust.
Trustees distribute the money at their discretion, based on the settlor's wishes (usually in a letter of wishes).
Letter of Wishes
Although the trustees have discretion, you can guide them using a non-binding letter of wishes, suggesting:
Who should benefit (e.g., spouse, children)
In what proportions
Under what circumstances (e.g., reaching age 25, education costs)
Important Points:
Potentially Irrevocable: Once in trust, some trusts stipulate that you can’t take the policy back.
Policy Ownership: You must transfer ownership to the trust.
IHT Benefits: As long as you don’t retain benefits or die within 7 years of making certain gifts (depending on trust structure), the payout is usually not subject to inheritance tax.
Get your life insurance Trusts in place now
Protect yourself, your family and your liabilities by arranging the correct life insurance Trust. Safeguard those you wish to protect.
Contact us today for more information on Trusts and the appropriate life insurance cover.