Nobody wants to talk about death, but it’s something that happens to us all. That’s why it’s essential that if you have dependants who you want to take care of even when you’re not around, you need to find and sign up to a life insurance policy, Active Brokers can help, check them out.
Once you have your policy, however, you might be concerned with how your money is going to be transferred to your loved ones when you pass away, and if you’re really looking to provide them with the maximum amount of money, you should look to having your policy written in trust.
–What Are Trusts?
A trust is an arrangement which is set up to ensure that your loved ones receive the full amount of money that they’re entitled to if you pass away. If you don’t have your life insurance policy written in trust, your savings will be open to deductions as a result of inheritance tax.
So essentially, writing your policy in trust enables you to leave your loved ones with precisely what you had in mind. Unfortunately, only around 6 percent of life insurance policies in the UK are set up with these precautions in place.
–Side-Stepping Inheritance Tax
The greatest advantage to writing your policy in trust is that it allows you to navigate around inheritance tax. The threshold for inheritance tax is £325,000, so it’s fair to say that if you have this much money in capital that you’re looking to pass on to loved ones, you don’t want any of it to go missing as every penny of it is hard earned.
The rate of tax on anything over this amount is 40 percent, so if you can help it, you don’t want to waste it. Writing a life insurance policy in trust ensures that the money goes directly to your beneficiaries, and is therefore not considered by the tax collectors.
–Are There Any Draw Backs?
As you can see, writing your policy in trust has great advantages, but there is a disadvantage, too. It’s very unusual for a policy written in this way to be cancellable, meaning that once it’s written, it’s there to stay.
Therefore, think long and hard about how to make sure your policy is fair. Other than this, however, there are very few negative points to make about this sort of policy. Having it written in trust is no extra cost and has few downsides, so why wouldn’t you choose one?