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THE EDUCATION SECTIONJanuary 2012Every month we look at a particular financial topic in a little more detail. This month it is Trusts.____________________________What are they?Atrustisawayoftransferringownershipofyourassets-suchaslifecoverpolicies.However,trusts areusuallysetuponanirrevocablebasis,whichmeanstheycannotbetornupandrewrittenlikea will. You can however, under certain circumstances, amend beneficiaries.Who is involved? There are three sets of people involved in a trust: •The settlor – that’s you: the person who sets up the trust.•Thetrustees–thesearethepeopleyouentrusttoadministerthetrustandlookafterthe interestsofthebeneficiaries.Itrequiresadegreeofresponsibilityandthesettlorwouldusually be one of the trustees. •The beneficiaries – these are the people who will benefit from the trust.When setting up a trust you need to choose these people carefully.What is the benefit of putting life insurance policies in trust?•The key & most important point is that the right people get the right money at the right time.•Intheeventofyourdeath,yourlifecovercanbedistributedmorequicklytoyourbeneficiaries, ratherthangoingintoyourestate,whereitcouldnotbedistributeduntilprobatehadbeen granted.(Thisisaslongasyouappointatleastoneadditionaltrustee,whosurvivesyouandso can administer the trust after your death.)•YoucoulddrasticallyreducepotentialIHT,yetstillkeepsomecontrol.Thisisbecausethe proceeds of your policy in trust will not normally form part of your estate.•Iftheintendedbeneficiaryisaminororsomeoneunabletolookafterhisorherownfinances,a trust will help ensure that he or she will receive control of the funds only when the time is right.•With‘FlexiblePowerofAppointmentTrusts’,thetrusteeshavesomeflexibilitytochangethe beneficiaries if circumstances change in the future. Are there any disadvantages to putting a policy in trust?•You must have the correct type of trust to make sure that it will do what you want it to do. •Youmustmakesurethatthetrustiswrittencorrectly–otherwisebenefitssuchascriticalillness or termonal illness could go to the beneficiaries instead of you. •Onceatrusthasbeensetup,itcanbedifficulttochange,especiallyifyou’renolongerin contact with one or more of the trustees. •Incertainunusualcircumstances,thetrustcouldbecomesubjecttoIHTatupto6%.Forfurther information on this issue, please seek specialist advice from us. What if you have life policies that you think should have been placed in trust?It’snottoolate….didyouknowthatexistinglifepoliciescanbeplacedintrustwiththecompletionof just a few simple forms? Ifyouwouldliketodiscussanyexistinglifepoliciestoseeiftheyshouldbeplacedintrust,donot hesitate to contact us for further advice. The value of any tax advantages will depend on your personal circumstances which may be subject to change in the future. Remember tax rules can also change. The Financial Conduct Authority does not regulate Taxation Advice.