What is a trust?

A trust is similar to a secure locker – think of it as a locked box holding your valuable items that you intend to leave to the special people in your life for their benefit. In the case of a life assurance policy that’s placed in Trust, it’s the life assurance policy that’s in your ‘locker’ and following your death, the monies from the claim on it are made quickly available to those that you want to benefit from the policy.

The valuable item in your Trust (locker), in this case your life assurance policy, it is not regarded as part of your estate with the result that, following your death, the claim monies can be paid quickly to your loved ones without having to go through the legal and sometimes lengthy probate process.

When you set up a Trust and place your life insurance assurance in it, you are technically known as the ‘Settlor’ and appoint people you trust, known as your ‘Trustees’ to ensure that following your death, the claim monies, known as Trust Property, are passed to those you want to benefit. You do this by giving your Trustees instructions, known as Trust Rules and following your death, your Trustees open your Trust and distribute the contents according to your instructions.

Who is involved in my trust?

There are three key roles within your Trust – the Settlor, the Trustees and the Beneficiaries.

The Settlor

The Settlor, or Truster in Scotland, is the person who establishes and puts assets into the trust. Settlors are usually individuals or couples.

The Trustees

The Trustees are the people who control and oversee the Trust. Anybody can act as a Trustee as long as they are over 18 and have full mental capacity.

The Beneficiaries

The beneficiary of the Trust benefits from the arrangement. For example, they may receive money from your life assurance policy, a following your death, the claim monies are paid into your Trust and then distributed by your Trustees according to your wishes. Certain Trusts can give the Trustees discretion over how and when these benefits are given to beneficiaries.

Key reasons for setting up a trust

Avoiding Probate Delays:

Usually, after you die your funeral costs and any outstanding loans, debts, taxes and probate fees must be paid before your assets can be distributed in line with your Will. However, the executors of your Will can’t access your assets until probate is granted – so they must find the money from elsewhere. As a Trust is separate from your estate and sits outside it, your Trustees can immediately access any money held in it and distribute it quickly accordingly to your wishes.

Control! Making Sure That Your Assets Go To The Right People, At The Right Time:

A Trust lets you keep control over the assets you placed in it. Common examples are;

When someone is in a cohabitee relationship. Unlike a marriage or civil partnership, following death of a partner, cohabitee relationships are not currently recognised by Intestacy law and the Trust enables assets to be made available quickly to your surviving partner. When somebody remarries but has children from their first marriage. Usually they want to ensure their second spouse is taken care of for the rest of their life, after which some/all of the remaining monies will pass to children from the first marriage. A Trust lets them do this.

Protection:
Trusts are a means of protecting assets for the beneficiary, for example, should you have young children, enabling them to access the claim benefits from your life assurance when they reach age 18.

Privacy:

A Will is a private document when you are alive but becomes a public document following your death, a Trust is a private document both in life and death. Saving Inheritance Tax, despite what you may read in the media, very few people in the UK leave estates large enough to require to pay inheritance tax but where they do, Trusts offer a useful way to save inheritance tax without having to make an outright gift to another person. If you place assets into a trust to which you cannot benefit, after 7 the assets will fall outside your estate for Inheritance Tax purposes. Any growth on the assets will immediately be outside your estate. At Absolute Military we are committed to ensuring that should the worst happen, your loved ones are supported and we will recommend that you set up a Trust for your life assurance policies where we feel that it is required.