do i need to put life insurance in trust?
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. Currently, the standard Inheritance Tax rate is 40%, which is charged on the part of your estate above the £325,000 threshold.
How long does a trust last?
Technically, your trust can last up to 125 years – there is no expiry date for trusts set-up for charitable purposes – but ultimately, your trust agreement should last however long you deem necessary. Your personal circumstances may influence the length of time you stipulate; for example, the trust could last until a child grows up and marries.
Is there an extra cost?
There is no added cost to putting life insurance in trust. You can put your personal life insurance policy in trust when you take it out, or at any time after that – you simply need to own the policy. You should note that if you transfer your life insurance policy to another individual, this may have implications for your trust so it’s best to contact me directly or seek legal advice.