Should you put your life insurance in trust?
Of the vast majority of Life Insurance policies in existence, figures provided by the UK life insurance industry show that only a very small percentage is written in trust. There are major benefits to putting life policies in trust so many people and their families are missing out.
So do you need life insurance in trust?
Well, this very much depends on your own personal circumstances. The main benefits of writing a policy in Trust are that the policy proceeds are paid out very quickly, there is no need for probate/executry, and the policy payout does not form part of your estate for inheritance tax.
There are three parties needed for a trust:
1. The Settlor – This is you. You are gifting this policy into the Trust.
2. The Beneficiaries – These are the people who will receive the policy proceeds in the event of death. You can nominate spouses, children, grand-children etc and also specify amounts of money or percentages they will receive.
3. The Trustees – These are the people that oversee and look after the Trust. Trustees need to ensure that funds are distributed according to the trust deed.
Significant Inheritance Tax (IHT) savings can be made by placing life insurance policies into trust as the policy proceeds are paid to the Trust and not your estate. Most life insurance companies provide basic trust documents for free so there is no additional cost unless your situation is particularly complex.