Should I put my cover in trust?
By placing your life-insurance policy in trust, the proceeds from the policy can be paid directly to the beneficiaries rather than to your legal estate, and will therefore not be taken into account when inheritance tax is calculated. This is a very tax efficient way to ensure your loved ones get what you want.
What is a trust?
- A trust is simply a legal arrangement that holds an asset, such as a Life Insurance policy, separately from the rest of your assets for the benefit of at least one other person.
- When a Life Insurance policy is written into trust, the payout is effectively ringfenced, keeping it outside your estate.
- Keeping life insurance in a trust and outside your estate means your beneficiaries get access to the money faster, alleviating any financial burdens quickly.
- There’s usually little to no additional cost to putting Life Insurance into trust and minimal additional paperwork.
If you don’t place your Life Insurance in a trust, it becomes part of your estate when you die for inheritance tax purposes.
You don’t have to put your life cover into a trust, but there are numerous benefits to doing so. A trust generally offers greater control over the payout, increased tax-efficiency and allows you to use the policy for estate planning.