Life insurance as I am sure we all know will pay out in the event of the insured person passing away. There are various different types of life insurance for your needs. These can be simple Term Assurance policies through to Whole of Life policies.
Most people consider life insurance at the time of purchasing or remortgaging their home. But there are other times when you might consider it, birth of a child for example of there are even business related life insurance polices such as Key man insurance (which would pay out in the event of someone important to the business passing away).
The most common types are either Decreasing Term Assurance Level Term Assurance and these are typically linked to a Mortgage (but there is no requirement for them to be) and although they are typically taken out at the time of a mortgage, the policies will run independently from the mortgage.
There are also other types of personal life insurance such as Family income benefit (FIB) or even the over 50s plans. You may have seen adverts on TV with the free pens, those are also a type of life insurance.
What does a Trust do?
Trusts turn a simple life insurance policy in to so much more.
Trusts are quite technical and are a way to circumvent certain laws and HMRC wording. In short, they ensure the policy gets paid to who you want it to quicker and usually more economically than if the policy were not in trust, avoiding tax legally with no grey areas!
How does a Trust work?
From a practical point of view, you more or less sign a piece of paper and ask a couple of people to act as a trustees.
There are 2 aspects to a Trust:
- Firstly, it can act like a Will. You decide who the life policy gets paid to and when whilst setting up the trust.
- Because of how the policy is owned once it is in Trust, it helps to avoid or reduce tax burdens associated with inheritance.
For something so complicated, it is actually quite simple to do.
How can we help?
At Wealth Success, we can help you set up the life policy. We have access to a number of insurers to ensure you are getting a quality policy (not all life insurances are alike – but that is a post for another time) at a fair price.
If you already have a policy but it is not in trust, do not worry. We can help with that too. We can help you to put the policy in trust. In addition to that, we can also ensure the trustees understand their role in the process too.