Understanding life insurance trusts: a crucial estate-planning tool

Life insurance provides a safety net for loved ones in the event of your passing. However, simply purchasing a policy does not ensure that your assets are distributed according to your wishes. This is where a life insurance trust comes into play, offering a solution for managing and protecting your wealth and assets in the event of your death.

What is a life insurance trust?

A life insurance trust is a legal entity created to take ownership of a life insurance policy. The trust is managed by a trustee, who is responsible for distributing the proceeds according to your wishes and ensuring the funds go to the beneficiaries you have selected.

What are the benefits of a life insurance trust?

By placing your life insurance policy in trust, this removes the funds from your estate, meaning beneficiaries are not liable for any type of taxation on the proceeds. It also ensures that the funds will bypass the typical probate process, allowing an expedited pay-out for your beneficiaries.

A life insurance trust is therefore a valuable tool for protecting your assets for future generations. By completing a trust for your own life insurance policy, you can ensure that your wishes are carried out and provide for your loved ones in an efficient manner at a time they need it most. Most insurers offer trusts free of charge, so it is worth seeking independent legal advice to help you determine if a life insurance trust is the right strategy for your unique circumstances and goals.

Further information:

https://www.legalandgeneral.com/insurance/life-insurance/guides/life-insurance-trusts/

https://www.which.co.uk/money/insurance/life-insurance-and-protection/how-to-write-life-insurance-in-trust-ancNf5h4ygvJ