A straight forward – and often cheapest upfront - way to set up a policy in a trust is to use the standard forms provided by the insurance company.
Trust forms from insurers are generally two to three pages long, according to Kevin Carr, chief executive of Protection Review. He advises solicitors to be used for more complex situations.
Mr Carr says: “A trust form requires a named beneficiary, a trustee and witnesses to the signatures.”
Ian Smart, head of product development and technical support at Bright Grey and Scottish Provident, says advisers should be aware that provider’s forms have been designed by each company for use with their own policies.
He says it is important to make sure you use the form from the same company whose insurance policy you recommended. This ensures the description of the benefits in the policy documents matches that used in the trust form to avoid any confusion over what was intended.
Alternatively, Mr Smart says the client could ask their own solicitor to draw up a trust specific to their needs. If you use the company’s standard trust forms, Mr Smart says these are generally provided free of charge.
If the client asks their solicitor for a bespoke trust, he warns they will make a charge which could range from a few hundred to several thousand pounds depending on the complexity of the trust needed.
Esther Dijkstra, head of intermediary protection propositions at Scottish Widows, says whichever route a client opts for the most important thing is to seek expert financial advice to discuss requirements.
“Decide who you want the proceeds to go to and in what circumstances and ensure that those you have named are aware of their responsibilities.
“Life offices normally have a number of templates that can be used to set up a trust or you may want to seek legal advice where there is a need for a specific trust to be drawn up.
“Be mindful of the residency of the customer as there are different templates to be used if the customer is a resident in Scotland.
“Where it is appropriate to set up a policy in trust, it is very important that the trust is set up correctly. This includes appointing additional trustees to ensure that there are no unnecessary complications and delays if a claim is made.”
If using an insurer’s template the cost of putting an insurance policy into a trust is simply down to the cost of advice, Ms Dijkstra adds.
Alternatively, Chris McNab, protection product manager of LV, says a client may already have an existing trust – and want to put their life policy into it.
That can be done by insurers too, Mr McNab points out, however this is usually carried out by a deed of assignment, which is then sent to the insurer for them to update their records.