Life Insurance Trusts

Writing Life Insurance in Trust is one of the best ways to protect your family’s future in the event of your death. Your Life Insurance policy is a significant asset, and by putting Life Insurance in Trust you can manage the way that your Beneficiaries receive their inheritance. Here, we take you through the benefits of Life Insurance Trusts, how the process works, who’s involved and the other considerations.

What is a Trust?

Trusts are a straightforward legal arrangement that let you leave assets to friends, relatives or whoever you pick to be your Beneficiaries. A Trust is managed by one or more Trustees – family members, friends, or a legal professional – until the Trust pays out to your Beneficiaries, which can either happen upon your death, or on a specified date such as when a child turns 18.

Your Life Insurance policy can be put into a Trust, which is often referred to as ‘writing Life Insurance in Trust’. One of the main benefits of this approach is that the value of your policy is generally not considered part of your estate.

Who can be a Beneficiary?

A Beneficiary is the person who will receive the funds from your Life Insurance policy when this is paid. You can choose any person, or people, to be your Beneficiaries – this will entitle them to receive a pay out in the event a valid claim is made. Contrary to what some people may assume, there are no rules that restrict who your Life Insurance beneficiary can be.

Who can be a Trustee?

A trustee can be anyone over the age of 18, who doesn’t have a criminal record or any history of bankruptcy, even if they’re also a beneficiary under the trust. It’s normal to appoint at least two trustees and they’ll make decisions about the trust collectively.

Professional Trustees

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What are the benefits of Trusts?

There are many reasons why putting Life Insurance in Trust is a popular option. Here are some of the ways you can benefit from a Life Insurance Trust.

Control over your assets

If you don’t have a Trust, your money might be used to pay off outstanding debts. Putting Life Insurance in Trust gives you greater discretion, as you can decide who to appoint as your Beneficiaries and Trustees. Setting up a Trust is especially important if you’re not married or in a civil partnership, as otherwise, your assets may not transfer to the intended recipient.

Faster access to your money

Without a Trust, when you die your would-be Beneficiaries would need to obtain probate, which can cause delays. With a Trust in place, your loved ones could receive the inheritance within a couple of weeks of the death certificate being issued.

Protect your Beneficiaries from Inheritance Tax

Writing Life Insurance in Trust means the money paid out from your policy should not be considered part of your estate. There are exceptions; for example, you may be liable for an Inheritance Tax charge on the value of the property on each ten-year anniversary.