Advisers need support when helping clients write life insurance policies into trust, according to Ana de la Quintana, director at Bright Investments Pensions & Savings.
She was speaking in response to a survey from Legal & General (L&G) which said that advisers were not mentioning the benefits of writing policies into trust as the application takes too long.
Ms de la Quintana said that the onerous application presented an opportunity for providers to collaborate and create a standardised template.
She added: “In my experience it takes time because the document needs to be completed by the client with witnesses and trustees. It would help if there was a way the policyholder could do it online. The providers have the resources and the money to find a way to do it.”
The report from L&G found that one-fifth of advisers could be putting life insurance customers at risk by not knowing the benefit of writing life insurance policies into trust.
Just over a quarter (27 per cent) of advisers claimed that the policy application process took so long that they ran out of time to discuss it. Clients who do not have policies written into trust and who do not have a will risk their payouts not going to their desired beneficiaries.
A trust is a legal arrangement that allows the customer to gift their life insurance policy to someone when they die. It is also meant to ensure that the money paid out would not be part of the estate of the person covered. This means that the policy holder’s beneficiaries won't have to pay inheritance tax on it, or risk the payout being delayed.
If a life policy is not placed into trust, the proceeds may not go to the person the customer wishes. If the policy holder is not married and has not made a will, their partner may not be legally entitled to the policy proceeds at all.
The L&G study further revealed less than half (45 per cent) of advisers always discuss these benefits with their clients, with 18 per cent stating that it is not something that they prioritise talking about.
These conversations were not taking place mainly because of the length of the application process. However, the same study found that almost a quarter (24 per cent) of advisers think that over 90 per cent of their clients should have their policies written into trust.
Craig Brown, director of Legal & General Intermediary, said: “More education is clearly needed around the topic of trusts to ensure that clients are offered all relevant options and can make the right decisions to best suit their needs.
“Our 2016 research found that for three-quarters of intermediaries, achieving quality customer outcomes is the most important aspect of their day-to-day role. In order to ensure this is happening, it’s important that advisers themselves are aware of the products and services out there which will really make a difference to their clients.”