A Guide to Writing Life Insurance in Trust

By Bob Atoo
June 30, 2014

A Trust is a legal arrangement which is designed to help ensure that the payout from your insurance policy will go to the person or people that you intend it to. Putting your life insurance policy in trust could be very beneficial, as you will see by the potential benefits listed below.

Advantages of writing a life insurance policy in trust

Trusts can help to cover inheritance tax

  • This is seen as the biggest advantage to having a policy in trust as without one, the payout may be subject to inheritance tax.
  • After death, if the value of your estate is £325,000 or more, everything you own above this threshold will be liable to inheritance tax at 40%.
  • By writing your life insurance policy in trust, the payout would go straight to the beneficiaries and therefore not taken into account when inheritance tax is calculated.

Granting probate is not needed

  • Probate is the legal process which confirms an executor’s authority to deal with the money and possessions you leave behind. So if you leave everything to your spouse, they will have to get probate granted before being able to distribute your estate. This process can take a long time.
  • With a life insurance policy in trust, then the policy payout can be granted before probate is issued, as all the insurance company will request is a copy of the death certificate.
  • This means that the family face less worries about when your insurance policy payout will come through (without a trust this can take months).

You will have greater control over your policy

  • Writing your life insurance in trust will allow you to specify how you want the payout to be distributed after you pass away.
  • Without having life insurance in trust, the money could go to paying off debts instead of going to dependants as you would like.

You should take appropriate legal advice before setting your trust up. This will confirm that you have the right arrangement in place to suit your needs. Other things to note are that writing your life insurance in trust does not cost any extra, and if you already have a policy in place then most companies will allow you to transfer this into trust.

Visit our life insurance page for more information and to get a quote, or contact us below if you have any questions or need any help regarding life insurance…