Assigning your Life Assurance into Trust

This is where the Trustees have an absolute discretion to what proportions to issue funds and to which beneficiaries.

 

No beneficiary has an absolute right to receive income or capital or to control the Trustees and therefore each individual beneficiary could, at least in theory, receive nothing at all.

 

You could put all the funds into a Discretionary Trust with your children as the nominated beneficiary. Your Trustees would have a discretion to use the money for your children as they consider reasonable.

 

The big advantage of a Discretionary Trust is its flexibility. If the circumstances of the beneficiary changes and should they require more or less money from the Trust Fund, then the Trustees can manage the Trust so as to reflect this.

Care - Many people will set up a Discretionary Trust in order to protect their assets if in the event a beneficiary goes into a care home.

Holding the assets in the Trust ensures that the monies are not included in the Beneficiaries’ own estate and therefore, will not be included when assessing their Care Costs.

 

Creditors or Bankruptcy – Similarly if any of your Beneficiaries are subject to Creditor Claims/Bankruptcy then their inheritance would not be exposed to these claims

 

Generational Inheritance Tax (IHT) – Holding assets in the Trust ensures that they do not add to the Beneficiaries’ own estates and thus impact on their own Inheritance Tax.

 

Marriage after death – Having the Trust Fund in a Trust ensures that, should the surviving spouse/partner marry in the future, those assets cannot be taken into the marriage and removes the threat of your children/chosen Beneficiaries being disinherited. The survivor is still able to use the monies in the Trust.

 

Divorce – Having the Trust Fund into a Trust ensures that, if your children/chosen Beneficiaries are subject to divorce proceedings, then what you intended them to receive is protected from any such proceedings.

Trustees are the persons appointed to manage the Trust assets. They need to be people that you can trust to carry out your wishes. Trustees must be:

 

• Aged 18 years old or above
• Have mental capacity: and
• Cannot be declared bankrupt

 

Trustees responsibility and duties include:

 

• Being legally obliged to manage the Trust Fund on behalf of all the beneficiaries:
• All dealings with the ‘Trust Fund’ by the Trustees must be for the benefit of the beneficiaries
• The Trustees must use their utmost diligence to avoid any loss. If they are negligent and a loss arises, they may be personally responsible for that loss to the beneficiaries.
• In England & Wales all Trustees must act unanimously Trustees decisions cannot be made by a majority of the Trustees.
• This is not the case in Scotland where Trustees may be allowed to act by a majority decision.

This is an informal letter/note to the Trustees explaining how you would like the Trust to be administered. This states who you would like to benefit, and which beneficiary has a priority. If in the event should one of the beneficiaries die, the Trustees would have the discretion to whom should benefit in their place

Inheritance Tax liability (IHT) is the tax paid out on death on estates worth over a certain amount.

 

The threshold has remained the same since 2010/11 and is currently set at £325,000.

 

Estates valued over the threshold amount will be liable to pay tax of 40% on all assets above £325,000

 

For singles and divorcees

The IHT threshold will be £325,000, any estate below this will be passed on tax free. However, anything above this will be subject to 40% tax.

 

For example:

 

If you take a Life Insurance policy of £400,000 and your estate is £250,000, your estate would be deemed to be worth £650,000.

Your IHT liability would be £120,000, which is 40% of £325,000. So, upon your death there is IHT liability that must be paid by your beneficiaries in order to receive their inheritance. Assigning your Life Assurance into a trust would avoid any IHT as the Life Assurance policy would be in a trust and therefore, it would not be included in the estate or in the probate IHT calculations. Therefore, as the estate is now worth only £250,000 and below the threshold, the IHT payable upon on death is zero. Thus, leaving your beneficiaries to the whole your Life Assurance pay-out.

 

For Married couples

There is no IHT between married couples. However, assigning your Life Assurance into Trust means that the surviving spouse will receive the monies before probate has been granted and have the funds to pay off any outstanding debts and funeral costs.

All applications are subject to a seven-day cooling off period.

 

To be eligible for a refund, we must receive your request for cancellation in writing via electronic transmission (email) within 7 days of the submission of the full application.

 

Email : refund@reassurance2u.com

 

• You have 7 calendar days from the date we received your application to cancel it.
• Should you cancel within 7 days, a full refund of fees less an admin charge of £25 will be applicable.
• There will be no refund for a Request for Cancellation after the stipulated period.

 

What happens once I have requested a refund?

 

At R2U we keep the process as simple as possible.

 

• Once we receive your request, we will immediately notify you on the status of your refund.
• If your refund is approved, we will initiate a refund to your credit card (or original method of payment).
• You will receive the credit within a certain amount of days, depending on your card issuer's policies.