While it can be a difficult topic to think about, it is also very sensible to think about what can happen once you die. Thinking about your life insurance now and not only choosing the right policy but deciding on whether you will use a Trust or not and who your trustees will be, will help your loved ones at a time when they need it most.

What is a Trust?


A Trust means that when you die, the legal ownership of your life insurance policy will be transferred to your chosen trustees. This means that the money from your life insurance, which could be a lump sum won’t be included as part of your estate when you die, which means that you and your loved ones will have more control over who benefits from it and your loved ones won’t have to pay inheritance tax. It is also likely to speed up the process of getting the money released to your family.


You can choose friends or family members to be your trustees or you could have a legal professional. A trustee can also be a beneficiary, for example, your spouse or your children (if they are over the age of 18) who is also named as someone who will benefit and receive some of the life insurance money.


Many people choose for their young children to be beneficiaries, so will choose a trustee who is over the age of 18 to oversee their assets until their children become of age.

Why You Should Put Your Life Insurance Policy in a Trust?


Putting your life insurance in trust means having more control over who benefits from what you leave behind and how you manage it. There are a lot of perks to doing this such as saving your loved ones from having to pay inheritance tax on the payout, getting the payout to your loved ones quicker and protecting it by ensuring it goes to your loved ones, rather than automatically paying off your debts.


When you die, not only will your loved ones have to deal with their loss and grieve for you, but there will be other things to arrange such as your funeral, sorting through your belongings, telling people what has happened and speaking to lawyers about your will. They will have to navigate this awful time without your help as you’ll no longer be there, so if there was any way to help them, wouldn’t you want to do it?


A good way to ease what your loved ones will be going through is to think ahead and prepare before you pass. If you can help to arrange your funeral or write a will then this will take at least some of the strain off your loved ones and make life easier for them.


When life insurance is written in trust, it will mean less paperwork for your trustee as they will only need to present your death certificate to make a claim. It also means that they will avoid a process called ‘probate’, which is when the court gets involved in dividing your assets, this can be a lengthy process for your family and also mean that your wishes might not be met.


Putting your life insurance in trust is not a decision that should be taken lightly, however, as it is a legal arrangement and has legal and tax implications. Once a trust has been set up you can’t decide to change your mind and just cancel it and it’s important to remember that you will be handing over the legal ownership of your life insurance policy to someone else which can’t be reversed.

How Putting Life Insurance in a Trust Can Mitigate Inheritance Tax


When you die, your loved ones have to pay inheritance tax on your estate. Your ‘estate’ is basically the term used to describe all of your assets together and It is important to know that if you don’t choose to write your life insurance policy in trust, it will be classed as part of your estate and your loved ones may have to pay inheritance tax on it.


Inheritance Tax is a tax of up to 40% on the total value of your estate, which if this includes your life insurance means that your beneficiaries could receive a smaller payout than expected and instead a large sum of money could go to the taxman instead.

The Benefits of Putting Your Life Insurance in Trust


There are many benefits to putting your life insurance in trust for you and for your loved ones such as giving you more control over what happens when you die and making life easier for your loved ones by diminishing the number of hurdles they will have to handle once you pass. These benefits include:


Avoiding Probate


Trusts can make it easier for your loved ones to gain access to your life insurance payment without having to go to court where it could be divided up among your other assets.


Protecting The Payout


If your life insurance payout is in trust then it is protected from creditors and won’t automatically be used to pay off debts, it will go straight to your beneficiaries.


Speeding Up The Process


Usually, your trustee will just need your death certificate to access the life insurance money once you die.


Avoiding Inheritance Tax


Putting your life insurance in trust means it’s legally owned by your trustees and isn’t part of your estate which means it won’t be subject to inheritance tax and your loved ones will get the full payout.

How Life Expert Can Help Arrange Everything To Put Your Life Insurance Policy in a Trust


At Life Expert, we offer a free trust writing service to make the process of putting your policy in trust an easy one. We will answer all your questions, and explain how the trust works and the different types of trust available to you. We are experts in what we do and we want to make this process as easy for you as possible so that you are in control and assured that your loved ones will be looked after.