Writing your Life Assurance Policy in Trust

Why bother about writing your life assurance policy in a trust? For one, this will protect the proceeds against huge taxes. Also, this ensures that the life insurance proceeds go directly to your trustees which are then responsible for giving the proceeds to the beneficiaries.

There are times when, due to some unforeseen circumstances (such as the original beneficiaries passing away before the insured), the proceeds of the life assurance policy goes into the insured’s estate. When this happens, the life assurance proceeds will be subject to inheritance tax. Inheritance tax is a whopping 40% of the estate value for amounts exceeding £300,000 (for an individual) and £600,000 (for couples). Also, when the proceeds go into your estate, there is the danger that the amount will be reduced by the estate’s existing debt.

Taking out life assurance in order to protect your loved ones from financial loss resulting from your death is a wise decision. But you should also provide one more layer of protection by writing your policy in trust.

The trust also has an added advantage of enabling faster payouts of the insurance proceeds. This is because putting the estate on probate, reading the will and distributing the assets can be a long and drawn out affair. This can mean that while your family may need money to pay for hospital bills and funeral and burial expenses, they can’t get access to the life assurance proceeds.

And the thing is, it is quite simple to have your policy written in trust. You simply need to inform your life insurance agent about your desire to do so. Most insurance companies will provide this added service at no extra charge. If you’re also buying the policy off the internet, you also just need to tell the seller the same thing. Now, if your financial situation is more complicated, you may need the help of an attorney in writing up the trust.

The drawback is that you must name the trustees that you trust entirely. You can also name the specified beneficiaries when you write the trust. You also need to re-appoint trustees if your selected trustee predecease you.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.