life insurance policy ....in trust?

rickyroma

I have just taken out a life insurance policy but when I die the lump sum payout will go to my estate. I would like to leave this policy to one specific person (a child) and after reading a bit about this I think I need to put the policy in trust(?).
How do I go about this? I spoke to my insurance company but they were a bit vague saying I needed a financial advisor to select the right type of trust.
I have only just started the policy so if I had to cancel and start from scratch it wouldnt be a problem

ACG

You dont have to do a new policy.

You have a bare trust, a discretionary trust and a split trust (im sure there are others but these are the main 3.

If you have critical illness cover, then it would be a split trust you need.
If you dont, then its a bare or discretionary trust. As to which one depends on what you want and how likely things are to change in the future. Most people go for discretionary (sometimes known as a flexible trust) but if your not sure you might be best speaking with your advisor or a solicitor.

If your not sure then you need to get advice.

magpiecottage

It is possible to put an existing policy in trust. If your health was failing that might have an impact on Inheritance Tax but it can still be done.

The norm is to use a Power of Appointment Trust and name a particular default beneficiary.

You are automatically a Trustee but will have some difficulty fulfilling your duty if the Trust ever has any assets as that will only occur if you are dead - so appoint a second Trustee (with their consent) and a third if you want one or more of the Trustees to benefit.

Trust law is also slightly different in Scotland to that in England and Wales - and Northern Ireland will be different again.

dunstonh

Insurance companies will have a number of trusts available for you to select to suit your needs. They wont have the full choice but the main ones. They will not provdie any advice in setting them up or which to have as that is not within their authorisations. If you need a different type of trust then a solicitor can do it (although that would be more unusual).

rickyroma

I have looked at the Legal & general advisor site and downloaded a form to set up an absolute trust for my policy. There is also a guide to read. It looks straightforward enough. I appoint one or more trustee and the sole benficiary is my son.
I dont have critical illness cover so according to a previous post I probably need a bare or discretionary trust. Are either of these also known as an absolute trust or have I looked at something entirely different?

dunstonh

I wouldnt go with an absolute trust unless you have to. A flexible trust is usually more suitable as it gives scope for changes.

ACG

I agree with Dunston, but have a look at this...
http://www.friendslife.co.uk/doclib/Trust_Selector.pdf

magpiecottage

ACG wrote: »

I agree with Dunston

Me too!!!!