Why use a Trust?

Putting your plan in trust doesn’t need to cost you anything, it can avoid a delay in benefits being paid out and may help avoid inheritance tax. Or to put it another way, a trust makes sure the right money goes to the right hands at the right time.

You can use a trust to give some or all of the benefits on your insurance plan to other people in the future whilst still retaining control now. This means that the benefits you give away wouldn’t be part of your estate if you died, and wouldn’t usually be subject to inheritance tax (IHT). IHT is currently payable at 40% on any part of an estate valued at over £325,000 (2018/2019). If you don’t put your plan in trust, any potential payout will typically be added to your estate.

Trusts can be flexible, which means you can have control over who will benefit from your plan as well as who’ll be responsible for making sure this happens. For when you’re setting up a trust, you have control over who will administer any money paid out from a claim (the trustees) and who will benefit from any money paid out (the beneficiaries). You can also make sure you will receive any benefits that you want to keep for yourself, for example any payment following a critical illness claim.

If you place your plan in trust it can help insurers to pay a claim quicker as it avoids probate. For if you were to die without putting your plan in trust, your representatives may have to go through the process of probate before they can deal with your plan. This process can take a long time, sometimes several months. Putting your plan in trust can avoid this delay.

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