Consumers risk billions by not putting policies in trust

Consumers risk billions by not putting policies in trust

UK consumers risk losing nearly £100bn because their life insurance policies aren’t written into trust, according to a recent study.

Research from Legal & General, from a survey of 100 financial advisers who sell life insurance and 1,006 consumers with life insurance between 17 and 23 November 2017, found 40 per cent of people have never heard of placing their life insurance policy into trust.

The same research found four in ten life insurance holders didn’t have a will in place.

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The calculation relates to an average life insurance payout of £39,000, multiplied by the number of policyholders who don't have a insurance in trust or a will.

A trust can help minimise inheritance tax , as well as ensuring that children or any other chosen beneficiary receive financial support from the money, but will not have full access to the lump sum.

Craig Brown, director of Legal & General Intermediary, said not placing a single-life insurance policy into trust leaves families vulnerable, particularly if couples are not married.

“By speaking with an adviser and putting a life insurance policy into a trust or making a will, policy holders will have much greater security," he said.

"Knowing that their family will be covered in the case of unforeseen circumstances will not only give policy holders greater peace of mind, but will also ensure that their loved ones gain the maximum benefit from their insurance policy."

Earlier research from L&G found a fifth of advisers are unaware of the benefits of writing their clients’ life insurance policies into trust.

However, Sebastian Hurst, from Plutus Wealth Management, said trusts were vital and all advisers should know about them.

“While they are not so important if you are married, because of the nil-rate band, they are important for everyone else,” he said.

“All advisers should know about them and if they don’t they shouldn’t be advising.”