Writing life insurance in trust…
02nd Jan 2017 |
Writing life insurance in trust is easy and could be very beneficial. So if you’re about to take our a new policy, or conscerned about an existing policy, you could benefit from the information below:
Key points:
- There is no delay in distributing the proceeds of your policy in line with your wishes.
- No need for the policy to be included in your Will.
- Proceeds can be distrubuted amongst a number of people.
- Protects the proceeds of your policy from your creditors.
- The trustees must pay the proceeds of the policy to the beneficiaries you named on the trust form.
- You can easily apoint for solicitor as the trustee.
Free Advice:
It’s not right for everyone, so read more and consider getting free, impartial advice from OneQuote.ie, simply lo call: 1890 727 111
What is a Life Insurance trust?
A life insurance trust is a legal document that ensures money from a policy claim is kept separate from your estate and therefore not liable to delays on pay-out, or to potential inheritance tax.
The asset is held by a trustee who must then forward these proceeds to the beneficiaries you name, at a time you choose.
When should I put my Life insurance in trust?
Single and dual life insurance policies.
A single life policy is any life insurance policy that insurers one person.
A dual life insurance policy is any life insurance policy that covers two people, with a pay-out made on each of the two people separately.
If you have a single, or dual life insurance, then you may want to write it in trust for the benefit of your spouse, your partner or another beneficiary. This would mean a speedier pay-out than putting it under your will, as it would by pass probate.
Probate is a legal process that confirms an executor’s authority to deal with an estate. Your estate meaning your assets remaining after your death.
If you died without a will and without putting your life insurance under trust, then your life insurance policy would still form part of your estate, but a different method of distribution would occur, again delaying pay-out.
Joint life insurance policies
A joint life policy is any life insurance policy that insurers two people, but only pays out once on the first death.
In this case, as both people act as joint policy owners, the pay-out on the first death would automatically be payable to the other person, not the deceased’s estate, so a trust is not necessary.
Advantages of having life insurance written in trust
There are three main advantages associated with having a life policy written in trust:
- Bypass probate
Probate is a legal process that confirms an executor’s authority to deal with an estate. In Scotland it’s known as ‘confirmation’ and it’s a process that can take some time, even if the deceased had left a will.
If a life insurance policy is written in trust it means that payments to beneficiaries are likely to be quicker and should be processed as soon as a death certificate has been obtained.
- Avoid inheritance tax
Writing life insurance in trust can result in any pay-out going direct to the beneficiaries rather than to the estate, meaning that the money won’t form part of the estate for inheritance tax purposes.
Depending on the circumstances, this could prevent the estate from exceeding the inheritance tax threshold.
- More control over distribution
When setting up a trust the policyholder has complete control when it comes to determining where the funds will go and can also define any conditions they want to associate with payouts.
This can be valuable in any number of situations, but just one could be protecting the future interest of children as beneficiaries should a guardian divorce and remarry.
Bear in mind that the flexibility offered by different sorts of funds can vary significantly, as can the policyholder’s ability to make any changes after the trust has been set up.
Once the trust has been created, it’s not typically possible to close it until it’s served its purpose and the policy can’t be cancelled without the permission of the trustees.
Who shouldn’t write life insurance in trust?
While it’s thought that most people don’t write a policy in trust because they don’t know about, it or believe it’ll be too much hassle, there are cases where the option wouldn’t be suitable.
- Holders of joint life insurance policies
- Holders of life insurance that needs to be assigned against a loan
- Holders of policies which include Serious Illness benefits
How do I write life insurance in trust?
When you take out a policy, the insurance application form allows you the option of writing your life insurance in trust and this option is free.
It’s also possible to transfer an existing policy into trust, although you may want to seek legal advice before doing this.
If you want more information and help, remember that you can get free, impartial advice from OneQuote.ie.
You can either lo call 1890 727 111 or request a call back.