You’ve placed your trust in life insurance. Now place your life insurance in trust

Knowing your family will be financially protected by your life insurance policy is priceless. But sadly for UK expats, it may also be taxable.

A life insurance policy is considered part of your estate, which means it could be subject to inheritance tax. However, by simply putting your policy into a Trust can help protect your beneficiaries from the tax man.

  1. Avoidance of unnecessary tax: UK Inheritance Tax wipes out 40% of any value over the threshold of 325K Sterling upon death. However, you can ensure your beneficiaries receive the money you set out to leave, simply by setting up an appropriately worded trust that keeps your protection policy outside of your estate.

  2. Expedite payments on death: The loss of a loved one is very often compounded by the financial problems that can burden families who are struggling to cope with grief. However, by writing a protection policy into your trust, it is possible for trustees to receive proceeds without the need for a Grant of Probate.

  3. Flexibility to make changes to your trust: However hard we plan for life, circumstances change over time. Marriage, divorce, additional children and loss of loved ones can all impact your estate planning. With the right wording, a Trust can incorporate a degree of flexibility, taking into account a number of beneficiaries, ultimately ensuring proceeds are received by the right person at the right time.

  4. Joint life policies: Proceeds from joint life policies are passed to the surviving partner. But if the partner dies a short time later, a Trust with an appropriately worded reversion provision can direct proceeds to dependents.

  5. Protect your young: The untimely death of parents is an upsetting prospect, but one you only need contemplate for a few moments. In the event children are robbed of their parents, an appropriately worded Trust protects their best interests, by placing large sums of money in the care of adults and solely for the benefit of the dependents, until they reach a suitable age.