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Trusts

Protection is all about your clients’ loved ones getting the money at the right time and quickly, when they need it most. Using trusts, they can be sure that the money paid out from their plan is handled exactly as they want, avoiding probate.

Once you’ve placed your insurance policy in trust you can’t usually change your mind and take it back out of trust later on. It’s important that you make sure our trust deeds are suitable for your client’s circumstances before you decide to use them. If you have any doubt, please speak to a legal specialist.

Trusts are legal documents which are a great way to make sure the money from a protection policy is given:

  1. to the right people
  2. at the right time
  3. usually without any inheritance tax liability

However, there are different types of trust available and it may not always be clear which should be used or the best way of setting it up. Trusts can't be changed later it's right that you're sure if our trust deeds are suitable for your client’s circumstances before you decide to use them. If you have any doubt, please speak to a legal specialist.

Who is needed to set up a trust?

Advantages
  1. Proceeds are paid to the right person or people.
  2. Proceeds are paid out quickly; there's no need to wait for probate (which can take some time).
  3. Helps to avoid inheritance tax - the proceeds won't normally be included in the deceased's estate and can usually pass tax-free to whoever is chosen as beneficiaries.
Disadvantages
  1. The policy can't be taken out of trust later on.
  2. Control over the policy is given to the trustees, so your client can't make changes to it.
  3. Your client can't benefit from the policy (can be complicated for joint life policies)

How to set up a trust

A trust is a legal document. We have draft documents in our document library that we know work well with our policies, but if need be you can arrange a trust form from a lawyer or another source.

Alternatively you can try our Online Trusts tool to help you through the decision making process and complete it all online.


About the Survivorship Clause

A survivorship clause allows a surviving settlor to get the proceeds of a trust if they survive 30 days from the death of the first settlor to die. If both settlors die within 30 days of each other, then the trust property reverts to the beneficiaries.

For example, if your clients are married with children, they could make sure the proceeds of their protection policy would go to:

  • Their children if they die within 30 days of each other
  • to the surviving spouse if one of them survives the other by 30 days

This means the trust can be flexible enough to provide the money where it needs to, by supporting the family at a difficult time, or provide for the children without being part of their estate for Inheritance Tax purposes.

To include the survivorship clause, your client will need to 'opt in' when filling in the trust deed. This is explained in the guidance notes for the trust deeds.

We've provided a brief summary of each of our trust documents and a quick way to download the deed and guide for each, which covers each in more depth. You can also these trust documents in our literature library. You can also try our Online Trusts tool to help you with the right deed.

What types of specimen trusts do we have?

Flexible Trust

What is it?

A trust which allows the trustees to change the default beneficiaries in the future from a range of potential beneficiaries.

What products can it be used for?

Normally a flexible trust is used for life protection, which will pay out a lump sum when the settlor dies. But your client can use it for other things too, such as an investment bond.

Fixed Trust

What is it?

A trust which a strict instruction to trustees on how to split the proceeds to specific beneficiaries, which can't be changed later.

What products can it be used for?

Normally a fixed trust is used for life protection, which will pay out a lump sum when the settlor dies. But your client can use it for other things too, such as an investment bond.

Split Trust

What is it?

A trust to let you split out the benefits of a Life with Critical Illness policy so that the Critical Illness payment will go to your client, or the death claim will to to the trustees to provide to the specified beneficiaries.

What products can it be used for?

A split trust is only to be used with a combined Life and Critical Illness policy.

Discretionary Trust

What is it?

A trust where the trustees have 'discretion' about how to use the trust's income. This means they can, if circumstances change, be altered by the trustees to make sure it’s still effective.

What products can it be used for?

A discretionary trust is used exclusively with a Relevant Life Cover policy.

Key Person Trust

What is it?

A business trust where claim is paid directly to the company or partners, allowing breathing space to help keep the business trading as normally as possible.

What products can it be used for?

Life Insurance, or Life insurance with critical illness cover set up to cover a key individual in a business.

Share & Partnership Protection Trust

What is it?

A trust trust is used to recover part of the business (either shares or a partnership stake in the business) so the remaining business owners can remain in control. The type of trust depends on the type of business being protected. A cross option agreement gives the surviving business owners the option to buy the deceased owner’s shares, and the estate the option to sell them.

More detail on Share & Partnership Protection trusts

What products can it be used for?

Life Insurance, or Life insurance with critical illness cover set up to cover an individual's shares or partnership in the business.

Our online trusts tool is our latest tool to help you decide and complete an online trust for your client with the minimum of fuss.

The Online Trusts tool supports:

  1. fixed and flexible trusts with survivorship clause
  2. split trusts with survivorship clause
  3. business trusts for Key Person and Share & Partnership Protection
  1. discretionary trusts for Relevant Life Cover
  2. electronic signatures
How to use our Online Trusts tool

Our Online Trusts tool will guide you through the process of setting up a trust for your client.

Simply, here's how it works:

  1. answer the questions to filter down to the most appropriate trust form we offer to use
  2. fill in the details on the trust form, including settlors, trustees and witnesses
  3. the settlors, trustees and witnesses will get an email, and can then sign the form electronically with a touch screen or mouse
  4. once everything is signed, the settlor will get an email to let you know we received the trust form
  5. we'll check the details, apply it to the policy and send a copy back to the client to keep safe

Worried about the data?

To be totally clear, any information that you give to us is only used to create the trust deed and we won't use it for any marketing purposes.

We'll only record the details on our systems permanently once you have sent the signed deed back to us. It's important to tell anyone whose details you've entered and named on the trust deed so they know that this will be happening.

Try our new Online Trusts tool

Need help?

Speak to our adviser support team for quotes or information.

  • 0800 678 1906
  • Mon to Fri 8:30am - 6:30pm
  • TextDirect: 18001 0800 678 1906

We will record and/or monitor your calls for training and audit purposes.

FOR UK FINANCIAL ADVISERS ONLY
LV=, County Gates, Bournemouth, BH1 2NF, UK