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Trusts – What you should know

Trusts – What you should know

A trust is a legal arrangement that separates any funds from the life insurance paid out on your death, from the rest of your estate (i.e., property, money, possessions).

Why you should consider placing your insurance in trust

The trust helps protect the life insurance pay out from inheritance tax. Typically, life insurance pay outs are free from regular taxes like income tax. However, the insurance pay out could count towards the value of your estate, meaning that your beneficiaries could pay more inheritance tax on your estate (assuming you are liable to pay inheritance tax).

The trust also allows you to choose who should benefit from the pay out and, in some cases, the proportion each beneficiary receives, making it easier and quicker to distribute the money than in the case of a normal life insurance pay out and without the need for probate (the legal formality of adding up and distributing your wealth and property).

Setting up the trust

It costs you nothing to set up the trust, which you can do through the insurance provider and/or through your financial adviser. Insurance providers have templates you can complete or you can set up the trust on-line. You will appoint people to oversee the trust (known as trustee(s)). It is the responsibility of the trustee(s) to make sure the money in trust is distributed to the people you want it to go to (the beneficiaries) after your death.

As the name suggests, the people you identify as trustee(s) should be people you trust. In choosing your trustee(s), it would be sensible to choose someone likely to outlive you. In addition, you could choose someone completely impartial.

The completed trust template will set out the agreed terms of the trust and must be signed by all parties. If you apply online, you will need to print off a completed template to obtain signatures and witnesses.

Things to think about

If you are in any doubt as to whether or not a trust is the right thing for you to do, consult your insurance provider or financial adviser. Once the trust has been created, it can’t be cancelled prior to it serving its purpose. In addition, it’s worth noting that the policy can’t be cancelled without the permission of the trustees.

The type of trust your set up will be based on your circumstances and the type of policy you have.

If there are any changes to the circumstances of your trustees, you must inform the insurer so that they can easily contact them should anything happen to you.

How Finance Expert Ltd can help

We can act as your intermediary during the trust process. As your adviser has probably been supporting you through the mortgage process, he’ll have knowledge of your circumstances and will be able to help you choose the right trust for you and your family. He’ll also be able to support you to complete templates; you’ll need to get all the signatures and witnesses, and then we can forward your completed trust to your insurer so that the trust and your wishes can be noted.

If you decide on a trust early on in the insurance application process, we can complete the templates as part of the application process. This may delay the start of your insurance, but only for a very short time.

If you’d like to discuss further, contact us via or give us a call on 0141 261 8678.

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