Updated: February 20, 2020

Relevant Life Insurance Trusts

Putting a Relevant Life Cover policy in Trust could be the right move for you and your business. Find out why in this helpful guide.

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Richard Angliss

Author: Richard Angliss - Finance Expert

Updated: February 20, 2020

Relevant life cover provides a lump sum benefit on the death of an employee. It’s often used by small business employers to provide death in service benefits to employees when they don’t have enough staff members for a death-in-service group scheme or cannot afford to set one up.

It is also a tax-efficient alternative for company directors paying for their own life protection.

Holding any life insurance policy in trust is a good idea and relevant life cover is no different. Some insurance providers won’t sell relevant life cover without setting it up in a trust from the start.

Read on to discover all the reasons using a discretionary trust for your relevant life insurance policy makes so much sense…

What is a relevant life insurance trust?

Relevant life insurance is a cost-effective method for employers to arrange life cover for an employee. The benefit, should a claim be made on the insurance, is payable to the beneficiaries of the employee, usually their family or dependants. Writing a policy in trust is tax efficient and helps meet legislative conditions.

Using a trust to hold the life insurance policy is a particularly useful way to make sure the benefits are payable directly to your beneficiaries and won’t be liable to inheritance tax or get slowed down through probate.

Why do I need to hold it in trust?

Like any life insurance policy, a relevant life policy is an effective and economic way to ensure funds are available to your family or dependants in the event of your death. By holding your insurance policy in a trust you can protect the money your beneficiaries will receive.

Using a trust to hold your relevant life policy will:

  • Provide a speedy payment to your beneficiaries
  • Protect the payout from inheritance tax
  • Give you peace of mind that any payout will benefit the people you choose
  • Allow more control over funds as a trust can decide when money will be paid out, which can be useful if you wish your children to receive financial support, without granting full access to the funds

Some providers will insist that a relevant life insurance policy be written in trust from the outset, and provide everything you need to set one up when you apply for cover.

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How do I set one up?

To set up a trust you’ll need people to fill the following three roles:

  • The beneficiaries – the people who will receive payment from the trust fund, usually the family of the insured employee.
  • The settlor – the person placing their assets into the trust or paying the premiums in the case of a life insurance policy. In the case of relevant life insurance, this is likely to be the employer. Once the trust is set up, the settlor has no rights to any benefits of the policy.
  • The trustees – the legal owners of the trust fund. These people look after the fund and following a claim will arrange for payment to be made to the beneficiaries. Trustees have discretion about which named beneficiaries will receive the funds from the trust and when. They are legally obliged to act in the best interests of the beneficiaries at all times.

When you are taking out relevant life cover, the provider of the insurance policy will provide all the documentation required to write the insurance into trust.

If you have questions and would like to speak to an expert about setting up a trust, get in touch and we’ll introduce you to one of the independent financial advisers we work with.

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Call 0808 189 0463 or make an enquiry for a free, no-obligation chat and we’ll connect you with one of the independent experts we work with.

All the experts we work with are independent financial advisors with access to insurance providers across the UK. They will be able to talk you through how a trust works, find the right policy for the best price and help you ensure you’re doing the right things to protect your beneficiaries and safeguard your assets from inheritance tax.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in relevant life cover. Ask us a question and we'll get the best expert to help.

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Richard Angliss

Richard Angliss

Finance Expert

About the author

Richard Angliss has made a career in financial services which stretches over 40 years.

His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.

For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.

At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.

With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them.  Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.

He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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