The Financial Group
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THE EDUCATION SECTION   January 2012 Every month we look at a particular financial topic in a little more detail. This month it is Trusts. ____________________________ What are they?     A   trust   is   a   way   of   transferring   ownership   of   your   assets   -   such   as   life   cover   policies.   However,   trusts are   usually   set   up   on   an   irrevocable   basis,   which   means   they   cannot   be   torn   up   and   rewritten   like   a 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. The   trustees    –   these   are   the   people   you   entrust   to   administer   the   trust   and   look   after   the interests   of   the   beneficiaries.   It   requires   a   degree   of   responsibility   and   the   settlor   would   usually 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. In   the   event   of   your   death,   your   life   cover   can   be   distributed   more   quickly   to   your   beneficiaries, rather   than   going   into   your   estate,   where   it   could   not   be   distributed   until   probate   had   been granted.   (This   is   as   long   as   you   appoint   at   least   one   additional   trustee,   who   survives   you   and   so can administer the trust after your death.) You   could   drastically   reduce   potential   IHT,   yet   still   keep   some   control.   This   is   because   the proceeds of your policy in trust will not normally form part of your estate. If   the   intended   beneficiary   is   a   minor   or   someone   unable   to   look   after   his   or   her   own   finances,   a trust will help ensure that he or she will receive control of the funds only when the time is right. With   ‘Flexible   Power   of   Appointment   Trusts’,   the   trustees   have   some   flexibility   to   change   the 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. You   must   make   sure   that   the   trust   is   written   correctly   –   otherwise   benefits   such   as   critical   illness or termonal illness could go to the beneficiaries instead of you. Once   a   trust   has   been   set   up,   it   can   be   difficult   to   change,   especially   if   you’re   no   longer   in contact with one or more of the trustees. In   certain   unusual   circumstances,   the   trust   could   become   subject   to   IHT   at   up   to   6%.   For   further 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’s   not   too   late….did   you   know   that   existing   life   policies   can   be   placed   in   trust   with   the   completion   of just a few simple forms? If   you   would   like   to   discuss   any   existing   life   policies   to   see   if   they   should   be   placed   in   trust,   do   not 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.