Creation of trusts—life insurance trusts

Published by a UU��ֱ�� Private Client expert

Practice notes

Creation of trusts—life insurance trusts

Published by a UU��ֱ�� Private Client expert

Practice notes

Defining life insurance trusts

A life insurance trust usually involves either:

•
an assignment of an insurance policy together with a declaration of trust, or
•
the creation of a trust containing an express assignment of the policy

Reasons to consider using a life insurance trust

The two main reasons are so that:

•
the policy proceeds do not form part of the deceased's estate
•
the proceeds can be obtained ahead of the grant of representation to the life assured's estate

Structure

Where a trust is created containing an express assignment of the policy, the usual structure is:

•
the insurance policy is assigned to a trust
•
the terms on which the trustees are to hold the trust property are set out
•
the trustees are given overriding powers
•
there is an ultimate trust

Assignment

A suitable clause assigning the insurance policy is, for example:

'2 Assignment
The Settlor as beneficial owner now assigns the Policy and all benefits and advantages of and all rights arising under and all money

Jurisdiction(s):

United Kingdom

Key definition:

Trust definition

What does Trust mean?

An equitable obligation (ie a duty imposed by the law of equity), binding the trustee to deal with property over which he has control (the trust property), for the benefit of persons (the beneficiaries), of whom the trustee may be one, and any one of whom may enforce the obligation.

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