Is Your Life Insurance Under Trust?

For many, making sure loved ones are provided for should they die unexpectedly is considered an important responsibility. However, according to research from Legal & General 82% of consumers have assets they wish to pass on to loved ones however in the event of a claim, two-fifths (40%) have never heard of placing their life insurance policy under trust. Worryingly, more than four in ten (43%) consumers questioned said they didn’t have a will in place.

A trust is a simple legal arrangement that allows an individual to place their policy in trust, the policyholder can indicate who they want the proceeds to be paid to and controls when the money from the life policy will be paid out. This can ensure that children or any other chosen beneficiary receive financial support from the money, but will not have full access to the lump sum. It also should help to ensure that any money paid out from the life policy will not be part of the estate of the person covered, helping to minimise Inheritance Tax. For example this means that their spouse, co-habiting partner or family members will be protected from the heavy financial burden of inheritance tax. It will help to ensure that the money paid from the life policy can be paid to the right people quickly, without the need for lengthy legal processes.

Those who do not place their single life policies in trust risk leaving their spouse, co-habiting partner or close family members in a vulnerable situation. If a single life insurance policy is not placed in trust, the proceeds may not go to the chosen beneficiaries as planned. For example, if the policy holder is not married and has not made a will, there is a risk that their co-habiting partner will not be legally entitled to any of the lump sum which could possibly leave them in financial difficulty.