If you are currently paying for life insurance or Whole of Life Insurance that is not written into a Trust or Trusts, then it’s likely not be the most efficient structure for you or your loved ones.
If your current policies are not written in Trust, when you die your life insurance will pay into your estate. For simplicity, we have illustrated this as a bucket.
Inheritance tax is currently set at 40% of the value of your estate, with the first £325,000 incurring no inheritance tax. It could prove more profitable for your family to have a life insurance policy that can be used to pay any inheritance tax especially if your policy is written in trust.
Traditional Life Insurance Policies
If your life insurance pays into your estate, then it may:
- Be subject to Inheritance Tax (IHT) at 40% – 40% of the value of your estate over £325,000 (2015/16) will be payable to IHT.
- Be subject to probate delay – Once you die, your estate will be frozen until probate is granted. This can easily take anything from three to 18 months, or even longer. During this period, no matter how serious their financial hardship, your loved ones will generally not be able to access the funds.
- Be dispersed in line with Government guidelines and not directly to your loved ones – If you die Intestate (without a valid Will), the government determine how your estate, including your life insurance, is divided up. In some instances, it will even go to the Exchequer.
We believe that you and your loved ones deserve more than any of the situations outlined above.
We believe that every penny of the insurance policies that you pay for, should go directly to your loved ones quickly and efficiently, in their time of greatest need.
Through our complimentary review of your current circumstances, we can quickly determine if you are in the situation outlined above. If you feel this is unacceptable and that you and your loved ones deserve more, we can help you to address your needs, as follows:
The Benefits of Trusts
We are extremely proud to be able to offer to protect you and your loved ones with appropriate life insurance policies and ensure that, where appropriate, these are written into Trust.
Once we have helped you to implement this solution, when you die, your life insurance policies will pay into a discretionary Trust and not into your estate.
This has the following potential benefits:
- With the correct planning, the proceeds would usually not be subject to IHT at 40%; the funds do not enter your estate and therefore are not subject to this tax in the same way as the first example.
- The proceeds would not be subject to probate delay; as the funds are held outside of your estate (in the Trust), your loved ones will be able to get access to the cash as soon as practically possible. This ensures that your loved ones have the funds in a timely manner when they need them the most.
- The funds would be guaranteed to go directly to your loved ones – you can determine who can and cannot benefit from the funds in the Trust. This can be stipulated during your lifetime and you can appoint people to ensure these stipulations are carried out.