There are many reasons why putting life insurance in trust is a good option.
1 - Your beneficiaries can get faster access to your money – without a trust, when you die your beneficiaries might need to obtain probate, which can cause delays. With a trust in place, your loved ones could receive the inheritance within weeks of the death certificate being issued.
2 - It gives you greater control over your assets – if you don’t have a trust, your money might be used to pay off outstanding debts before any left overs reach your loved ones. Putting life insurance in trust allows you to decide who to appoint as your beneficiaries and trustees, ensuring the proceeds of your policy go directly to them and not your estate. Setting up a trust is especially important if you’re not married or in a civil partnership, otherwise your assets may not automatically transfer to your intended recipient.
3 - It might allow you to protect your beneficiaries from Inheritance Tax – writing your life insurance policy into trust means the money paid out from your policy should not be considered part of your estate. There are some exceptions; for example, you may be liable for an Inheritance Tax charge on the value of the property on each ten-year anniversary. Currently, the standard Inheritance Tax rate is 40%, which is charged on the part of your estate above the £325,000 threshold.