Should I Have My Life Insurance In Trust?

Should I Have My Life Insurance In Trust?

What is a life insurance trust?

Nobody likes thinking about death, especially not at a time like the present when all of us are so busy living our life, right? However, the reality is, that the unexpected might arrive sooner than we anticipate. This is the reason why it is so essential to plan ahead and make sure that you are prepared for whatever life throws your way, whether it be something good or something uncomfortable.

It’s likely that you don’t want to think about what will happen once you’re gone. But one thing is certain: you will want to do everything you can to ensure that the people you leave behind are taken care of financially when you’re gone.
Putting your life insurance policy in trust, gives you greater control over who receives the payout from the policy. Inheritance tax bills are also less likely to be paid as a result of this, and the money will be made available to the beneficiaries faster than it would if the policy was not put in trust.

A life insurance trust is a simple legal arrangement that allows you to leave assets to relatives, or whoever you choose as your beneficiaries. One or more trustees manage a trust, until the trust pays out to your beneficiaries, which would happen when you pass.

Types of trusts you can put your policy in.

You choose who will be the beneficiaries of your life insurance policy. Also, the percentage of money that would go to each person. However, These are irreversible decisions that cannot change.

You name only potential beneficiaries of your life insurance payout in a ‘discretionary’ trust. So, if you die, it is up to the trustees to decide who gets the money (and how much) from the potential beneficiaries.

You name the beneficiaries of your life insurance and how the money’s divided up front. However, you can also name potential beneficiaries, such as unborn children or grandchildren. Your trustees will have the authority to change the list of beneficiaries, generally in accordance with your wish list in this type of trust.

Benefits of writing your life insurance policy into trust.

Life Insurance In Trust
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The payout won’t be subject to inheritance tax

When your policy is in trust, the money paid out from your policy isn’t considered part of your estate. Currently, the standard Inheritance Tax rate is 40%, charged on the part of your estate above the £325,000 threshold.

Faster access to your money

Without a trust, your intended beneficiaries would have to obtain probate, which can be time-consuming. With a trust in place, your loved ones could receive the pay out within a few weeks of receiving the death certificate.

Control over your assets

You can state who should receive the money when you pass. This overall, gives you true peace of mind that your life insurance will do what you want and need it to do for your loved ones.

How do I put my life insurance policy in trust?

In most cases, when you first go to purchase your life plan from an insurer, they will give you the option of writing the policy in trust. Because of this, it is helpful to have decided who you’d like to be your trustees. If you do decide to write the policy in trust, it is important to choose trustees who are willing and able to carry out your wishes.

In the end, if you feel that your primary assets (for example, your home and your finances) are valuable enough to be placed in a trust, you should think about doing the same thing with your life insurance policy. When it comes to life insurance, the single most important thing you can do is think thoroughly about all of your options and choose the trust that would be best for you and your loved ones.

We can help you cover all your bases at Carew & Co by giving you expert advice and support. We make sure that we put all policies in trust. All you have to do is give us the names of your trustees and beneficiaries, then we will do the rest for you!

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