Flexible Trusts:

This is a part of an insurance portfolio which is all to often forgotten. Many advisers will not assist you in this area as they consider it to be extra administration which they do not get paid for. We believe that it is something you should consider doing, or your life policy may not do quite what you intended it to in the event of a claim.

As it stands, if anything should happen to you, the proceeds of the policy will be paid to your estate, which could have two main consequences:

• It could either create, or compound an existing liability to Inheritance Tax (this is where your estate is valued above the current Government Inheritance Tax Threshold, and everything above that threshold is taxed at 40p in the pound).
• For the intended beneficiaries to gain access to the proceeds, Grant of Probate or Letters of Administration would have to be obtained (which can take several months).
• Joint assets held between spouses will automatically pass to the survivor on one party’s death and avoid the above, but consideration should be given to a situation where you die together.

By placing the policy in a flexible trust (at no cost to you) the following benefits would be available:

• The potential inheritance tax problem with this policy would be mitigated.
• The beneficiaries under the trust would receive the proceeds without the need of waiting for Grant of Probate or Letters of Administration.

A flexible trust works in the following way:

• The trustees of the trust will become the legal owners. You will automatically become a trustee, but it will of course be advisable to appoint one, if not two others as well. If a claim is made against the policy, the insurance company will deal with the trustees.
• The beneficiaries named in the trust will become the beneficial owners of the policy. That is to say, they will be entitled to receive the proceeds of the policy if it pays out. The beneficiaries may be changed at a future time by the trustees.

Personal circumstances vary from person to person. We will offer you the opportunity of placing your life policy in trust, but we will not offer you advice. If you are unsure as to whether to go down this route or not, please consult your legal adviser.