Downside of absolute trust with life insurance

caldi9

Hello, my wife and I are debating the right choice of trust to use for life insurances. While a discretionary trust has more flexibility, are there any other disadvantages of using an absolute trust? We are worried that in case of a discretionary trust in the worst case not 100% of the assets go to our only child.

thank you

Weighty1

The downside of an absolute trust is that the named beneficiary is the absolute and only beneficiary and therefore the money can be claimed from the trust if there was ever any litigation towards them, such as a divorce or other legal claim.  Since a discretionary trust has potential, but not guaranteed, beneficiaries this risk is removed because no claim could be made for money which isn't guaranteed to be the "potential" beneficiaries.

What makes you think that 100% of the trust proceeds would not go to your only child?  If you choose trustees you trust, such as close family members or even a solicitor (although they would charge for the service) and you lay out a letter of wishes explaining whom you wish to benefit from the trust money then they have a duty to follow those wishes so the risk should be absolutely minimal.