Trust

Graeme7777

Hi,

I would like to write an existing Life Assurance policy under a Protection Trust.

I have a silly question:

Once the Trust deed is signed and witnessed do I need to send it to the life assurer or does the Trustee keep it?

Thanks!

magpiecottage

Strictly speaking, no. It exists and can be presented at the time of a claim.

However, making the insurer aware of it can be helpful partly because they are then alert to it in the event of a claim (or at least should be) and that probate need not be waited for.

It is also helpful because if your health begins to fail, the policy will acquire a value - because the chance of a payout is increased and somebody may be willing to buy it. If a policy is then put into trust, it will be deemed to have been a gift equal to whatever that value was at the time for the purposes of Inheritance Tax.

If the insurer has a record showing that it knew the policy was in trust in 2010 then HMRC will normally accept that it was given then. By checking your medical records it can be shown that there was no reason to suppose you would not survive to the end of the policy at that time and that, therefore, it had no value at the time it was donated to the trust.

Whilst, in theory, it should make no difference, HMRC may otherwise challenge the trust and claim it was backdated.