Whole Life Insurance

Life insurance policies are assets like any other. As such, they can be put into a trust so that when you pass on, the funds that come from the policy are handled the same as any other assets in trust.

This is known as having life insurance “written under trust”.

Having life insurance written under trust will not be appropriate in every circumstance. However, particularly if you have your wealth tied up in mainly illiquid assets such as property, it can bring a number of specific advantages in terms of maximising the value of your estate and minimising Inheritance Tax (IHT) liabilities.

Discussing the legal and financial ramifications of putting life insurance into a trust with an experienced, qualified professional is essential. Our team of experts can advise on whether writing your life insurance into trust will benefit you, and if so, the appropriate level of cover, the most cost effective arrangement, how to approach the underwriting process and the management of the trust.

We also regularly review the level of cover to ensure it remains appropriate.

Benefits of a life policy written under trust

• Avoid Inheritance Tax. The pay out from a life insurance policy forms part of the assets you pass on to your family and beneficiaries when you die, and therefore may be subject to IHT. In legal terms, any assets placed into a trust do not form part of your estate, but are passed straight to the recipient under management of a trustee. As such, they are exempt from inheritance tax.
• Offset Inheritance Tax. Another way to think of a life insurance policy is as a way to raise extra capital to cover the expected IHT bill your family will have to pay. If the policy is in trust and exempt from IHT itself, your beneficiaries get the full sum to pay off the tax bill.
• Pay out prior to probate. When your Will is executed, it is likely that it will have to go through the process of probate, especially if your estate includes illiquid assets such as property. Obtaining a grant of probate from a court to confirm that the terms of the will are being followed crrectly can take time. But any assets in trust, including life insurance, are exempt from the probate process. This means your family will get the pay out much quicker.