Trust Information

After taking out an AA Over 50s Life Insurance Plan, provided by Legal & General, you may want to place it in trust to help ensure that the cash sum from the plan reaches the people you want it to.

If you don't place your plan in trust the cash sum will usually be paid into your estate, and distributed according to your will or if you don't have a will, according to rules set up by the government.

What is a trust?

A trust is a way of giving away something of value (in this case the life insurance plan) for the benefit of others (the beneficiaries), but without giving them full access to and control of the plan.

When placing the plan in trust you specify who you want to be a beneficiary, and who you want to look after and control the plan (the trustees). It is the trustees who will look after the policy, but they will not usually pay the premiums.

Inheritance tax

The other reason you may want to place your plan in trust is to protect against inheritance tax. If you don't place your policy under trust it will likely become part of your estate which could increase the chance of paying inheritance tax, or increase the amount of tax payable. The current Inheritance tax threshold, or 'nil rate band', is £325,000.

If you place your policy in trust it should be outside of your estate for inheritance purposes, and the beneficiaries should not have to pay inheritance tax on the proceeds in the event of your death.

Note that once you have created a trust it cannot usually be brought to an end before it has served its purpose. It is sometimes possible for the beneficiaries to bring a trust to an end if all the beneficiaries are over 18 and agree. This may be difficult in practice, especially where the beneficiaries include minors. It is therefore important that you contact your legal or financial adviser before creating a trust if you are unsure of whether it is appropriate for your circumstances.

It's your responsibility to make sure the policy meets your needs. If you need advice please contact a financial adviser. More information is in the Policy Summary – an important document you should read before applying.