Trusts For Life Insurance Policies
At present, when someone with a life insurance policy dies it
can take months for any payment to be made to their family due to a lengthy legal process.
Putting a policy in
trust can be a better solution. It is one way of helping make sure that the value of a life assurance policy is given to the
person that the life assured wants it to go to, without unnecessary delays. A trust avoids the need to obtain probate before
making a claim, thereby speeding up the process.
Policies written in trust are technically no longer your assets
and belong to the beneficiary from the moment the trust form is completed. Thus the benefit is outside of your estate and
will ensure the life insurance will not be taxed at the 40% inheritance tax rate on death. The monies are paid quickly
and avoid any probate delays with the HMRC, which can average six months.
Pitfalls to be aware of
If your Life Insurance policy is worth more than £350,000, special care needs to be taken when using a trust,
therefore please contact us to ensure this policy will not be subject to tax.
Care should also be taken if a couple
have two policies in trust for each other as this could make them ineffective, again, please contact us for advice as this
is a complex area.
Not sharing the same domicile for inheritance tax purposes as one person will loose the married
couples tax free allowance. Please refer to the 'Are you or your partner a Foreign National?' section.
FCA does not regulate Trusts and some forms of Inheritance Tax Planning.