Trusts

Making sure the right people benefit

For your clients who have a CanProtect Whole of Life Plan, Flexible Life Plan or CanProtect Term and Term Plus plans , it is important to make sure that in the event of them dying, the proceeds of the policy are paid to the right people in a tax efficient way.

The proceeds of any policies held personally would pay to the policyholder’s estate and could potentially be subject to UK inheritance tax and, as the sums assured can be considerable, this is more likely to be the case as only the first £325,000 of someone’s estate is free of inheritance tax. By using a suitable trust the proceeds of the policy can be paid to the beneficiaries outside of the client’s estate and without the need to wait for probate.

For our CanProtect Term Plus Plans, we offer a split trust. This has the benefit of making sure that any money paid out when they die is done so under trust and outside of their estate for inheritance tax purposes. However, any critical illness benefit is payable to the policyholder, under the trust, instead of the beneficiaries – after all if they suffer a critical illness they will have need for the policy proceeds.

For the CanProtect Whole of Life and Flexible Life Plan there are two types of trust:

  • A bare or absolute trust, where the beneficiaries are named at outset and cannot be changed. If the sum assured is paid out and the beneficiaries are over the age of 18 then the beneficiaries can demand payment.
  • A discretionary trust, as the name suggests, gives the trustees discretion, so if the sum assured is paid to them they can decide who benefits from the trust and when they benefit. As there is this level of flexibility the tax rules around a discretionary trust are different to those for an absolute or bare trust.

The value of investments can fall as well as rise and you should speak to a professional adviser to ensure that any investment is suitable for you.

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Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.