Life Assurance and Trusts

PaulWS1958

I have a long-standing (whole of life) life assurance policy which pays a significant sum on death. This has been in place for over 25 years. Can I put this into trust to reduce inheritance tax liability? The provider is saying I can't as this should have been done when the policy was taken out. 

tacpot12

It's normally not that difficult to put life policies in trust, most providers have a form you complete to nominate who will receive the sum payable on death, and you sign the form to agree that the trustees have discretion on who to pay the money to. 

If the firm won't accept an instruction from you to place the policy in trust, your options are to make a formal complaint and then escalate to the financial ombudsman, or to create the trust and assign the policy to it yourself. There would be a cost to creating the trust yourself, but this should be small in the context of any IHT bill. A local solicitor (ideally a Society of Trust and Estate Practitioner or STEP) should be able to help you. This page has more details: Putting Life Insurance in Trust | Legal & General (legalandgeneral.com) 

dunstonh

Normally, you can place a life assurance into trust after it is set up.   However, if it is an investment-backed life assurance, there are consequences.  

A pure life assurance going into trust has no issues as it has no value until it pays out.   Whereas an investment-backed life assurance has a value, which it didnt have at the start.

Also if the life assurance plan from 25 years ago was taken out with a legacy insurer and is now with a consolidator insurer, they may not have any trust forms available for you to use.    So, their response could be more down to them no longer doing it rather than you can't do it.

You can use trust forms of other providers if you understand what you are doing.  Or you can get a solicitor to write a suitable trust document.