Making it easier to advise your clients on trusts
Putting a personal protection policy into trust can help protect your client’s loved ones from inheritance tax, or avoid probate.
Designed to be used with your clients, this tool helps you explain the benefits of putting a personal protection policy into trust. It also makes it easy for you to set up a trust for your client.
It’s a good idea to supplement the discretionary, survivor’s discretionary and flexible trust with a letter of wishes which is a non-binding way of letting the trustees know who the settlor would like the policy proceeds to benefit.
Personal trusts explained
What is a trust and how does it work?
How do trusts work?
Who's involved in a trust?
Who can set one up?
Why is setting up a trust important?
Why should unmarried couples consider a trust?
Why should joint policy holders consider a trust?
What are the main benefits of having a trust?
Are there disadvantages?
When does a trust end?
Can the trust be cancelled?
When can a trust be set up?
Who controls the trust?
Can a joint policy be put into a Trust?
Do I need to tell you if my trustees personal contact details change, such as they move home or change their name etc?
What are trustees?
How many trustees should there be?
Do trustees have to be UK citizens, or live in the UK?
Who should be a trustee?
Can the trustees be changed later?
What if a trustee dies?
What are the trustee's main responsibilities?
How do the trustees make a claim?
Legal & General trusts
What types of Legal & General trusts are there?
What is a Discretionary trust?
What is a Survivor's Discretionary trust?
What is an absolute trust?
What is a flexible trust?
What types of Legal & General policies can be put in trust?
What types of Legal & General policies can't be put in trust?
Trusts and life insurance policies
What are the costs of setting up a trust for my life insurance?
Who pays the premiums on the life insurance policy?
Who can cancel the policy?
Trusts and tax
What are the main tax implications of using a trust?
Trusts and beneficiaries
Who can be a beneficiary?
Can the beneficiaries be changed later?
Important points to note
It's important to understand that in some cases, the trust itself might have to pay tax. However in the majority of cases, there are unlikely to be significant tax considerations, before the life policy pays out and also after a claim, as long as the money is paid out of the trust immediately.
However tax considerations can become increasingly important if the money is held in trust for longer and professional advice may be needed to help with this.
Certain types of policy such as the Family and Personal Income Plan (FPIP) policy usually pays out a monthly amount after the policyholder’s death for the length of time they decided so the potential for tax within the trust is higher.
The different types of trust are treated differently for IHT purposes. Discretionary, Survivors Discretionary and Flexible trusts are all types of relevant property trusts (RPT) and are largely treated in the same way; Absolute trusts are treated as a Potentially Exempt Transfer (PET).
For more information about tax please refer to our technical guides, or seek specialist advice.