Wills & Trusts
Getting your affairs in order
What is a Trust?
A trust is a legal arrangement that allows you to leave money and things you own (your ‘assets’) to a person or people (the ‘beneficiaries’) when you die.
A trust can be managed by family, friends or a solicitor (the ‘trustees’).
All your assets put together form your ‘estate’. Your life insurance is an asset and can be put into a trust in the same way as anything else.
Choosing to put life insurance in trust has a number of benefits, which include:
Control
Putting your life insurance in trust means you get to define exactly who benefits from what you leave behind.
You can also state who you’d like to manage it when you’re gone.
This means that you can make sure that what you leave behind goes to who you want to have it, when you want them to have it.
Speed
Probate is the process of dividing up your assets after you die and can take months to complete.
If your life insurance is in trust, your loved ones don’t have to wait for probate for the policy to pay out – usually your trustee just needs your death certificate.
However, they may have to apply for probate for other assets in the estate.
Tax
Tax – if your total estate, which includes your life insurance, is worth more than the inheritance tax threshold, there may be a 40% inheritance tax bill to pay on the part over and above that amount.
Putting your life insurance in trust means it’s legally owned by your trustees and isn’t part of your estate. This means it doesn’t count towards the inheritance tax calculation, and that means your loved ones get the full pay out.
What else do I need to know?
If you do not put a policy in trust the beneficiary will typically wait longer to receive the benefits and may have to pay more tax once they are received.
Although there are benefits to setting up a trust, it might not be the best thing for you. It’s a legal arrangement and you should think carefully before signing up.
A trust also has tax implications. You should seek guidance from a qualified tax adviser if you are unsure about any tax implications.
Although your insurance / protection adviser can set up your trust, they are unable to give any advice to you on tax matters.
Wills
Making a will is the only way to ensure that your wishes are met after you die.
Making a will is important because it’s the only way to make sure your estate goes to the people and causes you want it to. If you die without making a will, your estate might be distributed in a way that you wouldn’t want. It will be distributed according to the rules of intestacy. There is more information about this here.
You might not have got round to making your will yet, or maybe you’ve deliberately put it off – but while it can seem daunting, the process can actually be quite simple. It might be that you already have a will that you set up years ago and haven’t thought about for some time. It’s important to review and update your will at least every 5 years to make sure it still reflects your wishes – or sooner if there’s a major event in your life.
We can refer you on to a specialist will writing service as part of your protection review.
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