Sue Allen, of Chester Rose Financial Planning, said: “The form being simple to fill in doesn’t mean the decision is simple. Once in trust, the arrangement is usually difficult or impossible to unwind, so it is worth taking advice on the right structure for your circumstances before signing anything.”
In most cases, there will be no inheritance tax implications of putting a life insurance policy into trust, provided the holder is in good health.
Mr McCann said: “However, if you are seriously ill when you put the policy in trust and die within seven years, HMRC could argue that the policy had a value when you put it into trust and seek to include that value in your estate and charge inheritance tax.”
Generally, all single-life policies and joint-life second-death policies should be written in trust, according to Ian Dyall of wealth manager Evelyn.
However, this should usually be avoided for joint-life first-death policies as they are often set up to provide for the surviving spouse if the other dies. If the policy is put in trust then neither spouse can benefit from the proceeds on the first spouse’s death.