Trusts are often required when setting up business protection policies, according to Emma Davies, market development manager of Legal & General.
Whether a trust should be created for a business protection policy will be dependent upon how the policy is to be set up to meet the client needs and each case must be considered individually, Ms Davies says. For example, she says share protection policies are usually set up under trust arrangements.
But Alan Lakey, partner of Hemel Hempstead-based IFA Highclere Financial Services, recommends placing policies into trust. Placing business protection policies in trust eliminates doubt over the beneficiary and ensures that the benefits are paid without the delays associated with proving wills or intestacy, he says.
Among other things, Dougy Grant, protection director of Aegon, says a trust can help:
• mitigate inheritance tax;
• ensure that the claim proceeds are paid in accordance with the settlor’s wishes; and
• ensure that is no delay in accessing the proceeds in the event of the death of the life assured, as probate won’t be required.
Trusts will be required for relevant life, according to Mr Grant, and for business succession planning where the business owners opt for own life in a business trust.
A trust may also be desirable for key person cover taken out by partnerships under English law, according to Mr Grant, as a partnership is not a legal entity.
