Critical illness policy

Snowbird

Is it possible for a critical illness policy to be written into a trust in the event that it pays out? Rather like you can get life insurance written into trust?

HappyHarry

Snowbird wrote: »

Is it possible for a critical illness policy to be written into a trust in the event that it pays out? Rather like you can get life insurance written into trust?

Yes, but it isn't sensible for most people taking out CI cover.

Why are you thinking of doing it?

Snowbird

HappyHarry wrote: »

Yes, but it isn't sensible for most people taking out CI cover.

Why are you thinking of doing it?

Why is it not sensible?
A relative is thinking of doing it.

SonOf

Snowbird wrote: »

Why is it not sensible?
A relative is thinking of doing it.

CIC is meant to provide money to yourself in the event of a claimable event. To cover a whole range of things that the individual may need to do. Changes to the home, lost income, debt repayment etc.

Paying the money to someone else is unlikely to be beneficial.

Aretnap

The main advantage of writing life insurance into trust is that it will be paid directly to the beneficiaries rather than into your estate, which means that (a) the beneficiaries receive it more quickly and (b) it is not subject to inheritance tax.

With CI cover the payout is paid to you. You are not dead, so there is no inheritance tax to worry about, nor is there an estate which an executor has to wind up before the money can be distributed. So these advantages do not apply. What advantages does your friend/relative think he would gain by writing it into trust?

Snowbird

Aretnap wrote: »

What advantages does your friend/relative think he would gain by writing it into trust?

Someone told them that a large capital payment would affect means tested benefits. If it was written into a trust then then there would be no deprivation of assets if they spent it on say, school fees, which the DWP would not allow you to spend the money on.

SonOf

Snowbird wrote: »

Someone told them that a large capital payment would affect means tested benefits. If it was written into a trust then then there would be no deprivation of assets if they spent it on say, school fees, which the DWP would not allow you to spend the money on.

There is also no requirement on the beneficiary to spend the money on that person. Also, if the beneficiary goes on to die themselves, then the money forms part of their estate and passed on to their beneficiaries.

So, the person that needs it, wont have access to it.

So, very nice of them to gift it to a third party.

Weighty1

Snowbird wrote: »

Someone told them that a large capital payment would affect means tested benefits. If it was written into a trust then then there would be no deprivation of assets if they spent it on say, school fees, which the DWP would not allow you to spend the money on.

PLUS, if the critically ill person lost their mental capacity and required some form of power of attorney over their assets this could take months. If the plan is already in trust then the trust assets can be utilised by the trustees straight away.

Snowbird

Weighty1 wrote: »

PLUS, if the critically ill person lost their mental capacity and required some form of power of attorney over their assets this could take months. If the plan is already in trust then the trust assets can be utilised by the trustees straight away.

That is a really good point and one I had not thought of!

Keep_pedalling

Weighty1 wrote: »

PLUS, if the critically ill person lost their mental capacity and required some form of power of attorney over their assets this could take months. If the plan is already in trust then the trust assets can be utilised by the trustees straight away.

One would hope that anyone looking to protect themselves financially through critical illness would also have the forethought to put LPAs in place as well.

Weighty1

Keep_pedalling wrote: »

One would hope that anyone looking to protect themselves financially through critical illness would also have the forethought to put LPAs in place as well.

One would be wrong.

I'd be surprised if >1% of people with critical illness plans also have LPA's