Trust aren't just about Tax
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Although we may always be told to put life insurance into a trust, why should we?
Not just protecting from the taxman
You may have often heard about writing a life insurance policy into trust to mitigate Inheritance tax and this is a very good reason for using a trust but are there other reasons why you should use a trust?
A trust can help protect this policy from many things:
If your loved ones had the money absolutely then this could form part of the settlement, but if it was held within the trust then it is trust property not theirs so would not be included.
The proceeds of the policy could be eaten up by care fees but if they were in a trust then again would fall outside of any assessment.
This would potentially expose the insurance policies to generational IHT, even after your estate may have paid IHT, being left absolutely would mean the money forming part of your children's estate and could again be liable for IHT for a second time!
How do we access the trust
This is simply a case of the trustees, whom you would have chosen, making a loan to the beneficiaries, whom again you would have chosen. This loan would then be repayable on demand, but since trustees must act in the interest of the beneficiaries then this would only be at a time to suit you, for example during a divorce, or on death to reduce the value of the estate.
A word of warning
There should never be more than the Nil Rate Band (currently £325k ) in a trust as anything above this could be liable for periodical charges of 6% every 10 years.
The solution if you need more than that is 2 or more separate life policies for under £325k each going into separate trusts BUT these trusts must be established on different days under the Ryaffe principle.
For more information on this or if you would like one of our pdf's showing this in practise please contact me firstname.lastname@example.org 07894 336365