A trust is traditionally used to ensure life insurance policy payouts do not contribute to someone's estate for inheritance tax purposes when they pass away.
The trust instructs the insurance provider to pay the beneficiaries in days rather than months by avoiding the probate process.
All trusts need ‘trustees’ to manage the money when the life assured is deceased. They distribute the money as specified in their 'letter of wishes' or beneficiaries list.
I make sure that all of the life insurance policies I arrange are put into trust. The last thing any family member wants to hear after the passing of a loved one is they have to provide 40% of the life insurance pay-out to the taxman or they have to wait until after probate to receive their pay-out.
Alongside any life insurance application, I ask clients for three trusted friends or family members to be their trustees. As soon as the policy is in place, I will then make sure they have full security around the amount they are receiving and who this is being paid to… meaning the policy is placed into trust.”
Trinity Financial’s specialist adviser Danny Davis arranges life insurance and income protection policies. Call him on 020 7016 0799 to arrange a policy.