Trusts For Use With Protection Polices

The FCA do not regulate trusts.

Stand Alone Life Cover

A trust is suitable for single life and joint life second death plans to allow the proceeds to be paid straight to the beneficiary avoiding probate and ensuring that policy proceeds go to those intended. Use of a trust would also take the additional asset (i.e. the sum assured) out of the settlor’s estate for IHT purposes.

Survivorship Trust

Where a joint life first death policy has been recommended to provide financial protection for children or dependents this can be written into a survivorship trust with a ’30 day’ wording. This means that should the couple both die together or within 30 days of each other the proceeds are paid into trust for the beneficiaries. If however, one of them survives for more than 30 days, the proceeds are paid to the survivor and not the trust.

Split Trust for Life & Critical Illness Policies

Where combined life and critical illness polices have been recommended, a split trust should be used to ensure that the death benefit is paid in accordance with the trust and client retains the benefit of any critical illness claim.

Terminal Illness

Terminal illness is an advance of payment of the sum insured where the policyholder has been diagnosed with a condition which means life expectancy is less than 12 months. Terminal illness cover is identified through the terms and conditions of the life insurance plan.