Putting your life insurance in trust

Your life insurance policy is a significant asset and putting your life insurance in trust is one of the best ways to protect your family’s future - because it allows you to manage the way your beneficiaries receive their inheritance.

What is a trust?
Your life insurance policy can be put into a trust, which is referred to as ‘writing life insurance in trust’. A trust is a legal document that guarantees the proceeds of your life insurance policy will be paid to the right people, at the right time.

A trust is managed by one or more trustees – family members, friends, or a legal professional – until the trust pays out to your beneficiaries, which can either happen upon your death, or on a specified date such as when a child turns 18. You appoint the trustee, who then takes responsibility for distributing the proceeds of your policy according to your instructions.

Why put your policy in trust?
One of the main benefits is that the value of your policy is generally not considered part of your estate – which means payment of the policy sum can be made to your beneficiaries without going through the probate process.

Probate is the first step in administering the estate of a person who has passed away and distributing their assets under a will. This process usually takes 3-4 months – but under certain circumstances it can take much longer, sometimes years. Whereas if your life insurance policy is in trust, the money can reach your loved ones within a couple of weeks of the death certificate being produced.

Plus, any policy sum paid out on death which is separate from your estate because it is written in trust is paid tax-free to your chosen beneficiaries. Premiums paid under trust policies are considered to be gifts and therefore it is unlikely that there will be an inheritance tax charge if the policy is the only asset owned by the trust.

What’s more, you can alter your trust at any time, so if your circumstances change, you can change who you appoint as your trustee or receives the benefits.

How to put life insurance in trust
Placing your policy into trust is straight forward – with a little help – and we offer a free trust service. We will not charge to put your life insurance policy in trust, even if you decide to write your policy into trust after the time when your first took your policy out.

You will be asked to assign a trustee or trustees to manage the assets from your life insurance policy.

This essentially means that someone (or people) you trust will be given the responsibility of ensuring that the life insurance money is paid out exactly as you intended to the right beneficiaries. This is what negates the need for probate to be granted, even if a will has been written.

Our Customer Care team will guide you through the process, assist you with the necessary documentation and make sure your paperwork is completed and submitted correctly and so you have the added peace of mind of knowing that your family will get exactly what you want them to receive, should the worst happen to you.

For more information or help with trust forms please do not hesitate to contact us on 0800 612 8005.