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        Updated: April 18, 2024

        Putting Life Insurance into Trust

        Need to put your life insurance policy into a trust? Read our guide to find out how an independent financial advisor can help you do it right

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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 life insurance. Ask us a question and we'll get the best expert to help.

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        With life insurance you can create a secure financial buffer that will leave your loved ones well cared for in the event of your death.

        life insurance policy enables a quick pay out of a lump sum or regular income to your beneficiaries when you die. This can take the stress out of dealing with the immediate financial aftermath of a person’s death – particularly if the deceased was the main family breadwinner.

        But what people don’t often realise is that without careful foresight, the lump sum payout could be subject to 40% inheritance tax. This means you could lose nearly 50% of the funds you’ve been faithfully building over many years.

        This has made putting your life insurance into a trust a popular option – among other benefits, it means the proceeds won’t become a part of your estate and thus won’t be liable to inheritance tax.

        Why write your life insurance policy in trust?

        Life insurance put into a trust is defined as a legal arrangement in which you give power to a trustee to ensure the assets paid out from your life insurance policy are used exactly as you wish.

        Putting your life insurance policy into a trust is useful if you want to protect your assets: if the total value of your estate is valued over £325,000 if you are single or divorced, or £650,000 if you’re married, all assets above this threshold will be subject to a 40% inheritance tax.

        But writing your life insurance in trust could be a solution to preserve your hard-earned cash for the next generation. A trust places the insurance payout outside of your estate, keeping it safe from the taxman.

        How does a life insurance trust work?

        It helps your loved ones get faster access to funds by enabling a quick payout often within just weeks of your death.

        Writing your life insurance in trust can help protect your hard-earned wealth and assets for the next generation. If you’d like to learn more about the advantages of putting your life insurance into trust, speak to one of the independent financial advisors we work with. Make an enquiry and we’ll put you through to the right specialist. They are regulated by the Financial Conduct Authority which means they adhere to strict rules of conduct.

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        Should you put your life insurance into a trust?

        Putting your life insurance into a trust is a big decision and one that’s usually irrevocable. It’s wise to make sure you understand all the long-term implications by speaking to an expert financial advisor before making any such far-reaching decisions.

        Here are some of the advantages and disadvantages…

        Advantages of having life insurance in a trust

        • Your assets will be quickly paid out to the beneficiaries of your choice.
        • The proceeds won’t be included in your total estate when you die, so it helps reduce your liability for paying Inheritance Tax.
        • You can rest assured that your life insurance payout will go directly to the beneficiaries of your choice.

        Disadvantages of holding life insurance in a trust

        • You can’t change your mind or go back on your decision. Once your life insurance is placed into a trust, you won’t be able to take it back out of the trust.
        • You relinquish total control over your life insurance policy by placing it into a trust.

        What are the steps to placing my life insurance in trust?

        A trust is a legal arrangement that enables you to transfer your money or assets to the person or people of your choice.

        To put your life insurance into a trust, you’ll need to select trustees, find an insurance provider, and decide on whether you want to place life insurance into the trust immediately or assign it to the trust at a later date.

        Under most circumstances, placing your assets into a trust is irrevocable; you won’t be able to change your mind later on. With this in mind, it’s vitally important you make a well-researched and thought through decision about whether or not to place your life insurance into a trust.

        Make an enquiry and we’ll match you with one of the experts we work with.  They’ll be able to answer all your questions and help guide you through the decision-making process.

        How to set up a trust for life insurance

        To set up a trust you’ll need the following participants…

        • The settler or donor – this is the person who is placing their assets into a trust.
        • Trustee – the person or people who are legally appointed to look after the assets in a trust. Often the trustee is someone who is known and trusted by the settler, and who is likely to live longer than the donor.
        • Beneficiary – those who will receive the proceeds of the trust upon the death of the settler.

        Once you’ve decided who the trust participants will be, search the market to find a provider that offers the best rates and terms. An expert financial advisor can do this legwork for you, make the process straightforward, and give you peace of mind.

        Make an enquiry and we’ll match you with an advisor to discuss your options.

        Who can be a life insurance policy trustee?

        The assets placed into a trust, the trust property, are administered by a group of people, the ‘trustees’.

        The trustee is legally and morally obliged to manage the assets in a trust responsibly and productively. They are bound to act solely in the interests of the trust’s beneficiaries.

        Generally speaking, anyone who is over the age of 18, doesn’t have a criminal record, or any bankruptcies can be a trustee.

        Getting a life insurance trust deed

        To put your life insurance into a trust, you’ll need to create a trust deed; a legally binding document which outlines the parties that make up the trust, the trust terms, and the trust beneficiaries.

        A trust deed is the legal guarantee that ensures the money from your life insurance payout is used exactly as you intended. It acts as a will for the funds placed into the trust, removing the need for probate. Although making a will for other parts of your estate maybe beneficial too. Specialist help is out there from the experts we work with to assist with these areas.

        Getting a life insurance trust deed is a legal process which confirms the trust’s authority to deal with your life insurance payout when you die.

        Life insurance and wills

        For assets included in your will, you will have to get probate granted before they can be distributed. But a life insurance trust deed acts as a will for the funds placed into the trust, making sure the funds go directly to your beneficiaries without the need for going through a probate for that part of your estate.

        A life insurance policy that’s been written into trust with a trust deed will only require a death certificate before making the payout. This speeds up the process of passing the funds on to your loved ones, saving some time and hassle.

        What is an irrevocable life insurance trust?

        An irrevocable life insurance trust is a life insurance trust that cannot be amended or changed. It’s often used to set aside funds for specific purposes, such as paying inheritance taxes on your estate.

        Putting your life insurance in trust in the UK

        The rates, terms, and conditions for getting life insurance will vary according to the provider, so finding the right insurer requires careful research and a clear understanding of which policy best suits your needs.

        To put your life insurance into a trust in the UK, search the market and ask for quotations from leading UK insurers; find out how much you’ll need to pay monthly to get the lump sum payout you want.

        But bear in mind that once you’ve set up a trust for your life insurance, you likely won’t be able to change plans. The trustees will have control over your insurance funds and are permanently legally obligated to fulfil your wishes.

        That’s why it’s vitally important you make sure you get the right deal and have properly thought through all financial implications.

        Find the right life insurance quote and get help setting up your life insurance trust. Talk to one of the expert independent financial advisors we work with on 0808 189 0463. The service we offer is free and there’s no obligation.

        Restricted property trust life insurance

        Restricted Property Trust (RPT) life insurance is a way for business owners to reduce their income tax while continuing to grow their assets.

        The Restricted Property Trust works by buying a life insurance policy on behalf of the participant. The participant decides on who the beneficiaries of the life insurance are.

        Tax-deferred growth is possible as the life insurance policy is owned by the trust: annual payments into an RPT are fully tax-deductible to an employer, and partially tax-deductible for a participant. However, any taxes owed are paid out later down the line, when money is withdrawn from the insurance policy.

        For more information on how to set up a Restricted Property Trust life insurance, and what the specific tax advantages may be for your situation, make an enquiry or call 0808 189 0463. We’ll put you through to a financial advisor who can talk you through your best options.

        Speak to an expert advisor about putting your life insurance into trust

        Writing a life insurance policy in trust is a worthwhile step to help preserve your wealth for your loved ones and future generations.

        As someone setting up a life insurance trust you have an important role to play in ensuring the right provider and trustees are selected to look after the life insurance trust.

        The best way to do this is through an expert financial advisor who can take you directly to your best insurance policy. If you have queries about how to select trustees and find the best provider for your life insurance trust, contact us on 0808 189 0463 or make an online enquiry – we’ll do the work of connecting you to the right financial expert.

        Ask A Quick Question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in life insurance. 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.

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        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 as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

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