Not writing your life assurance polices in trust
What does "Written in Trust" with regards to Life Assurance mean?
Most life assurance companies supply a range of Trust Forms which allow you to ‘give away’ the proceeds of your policy in advance of your death. Basically you are named as the one making the gift (the Settlor). The people you want to receive the money are named as the Beneficiaries. They can be a class i.e. your children or grandchildren or they could be someone stated by name i.e. spouse. You will need to nominate a third party (the Trustee) to receive the funds for distribution according to the Trust. A close family member such as the Executor in your Will might be a good choice.
In the event of a claim, the insurance company pays out directly to the Trustees who then have a legal obligation to pass on the funds to the beneficiaries you name in the Trust. This has two major benefits:
1. The proceeds reach those in need quickly; usually within weeks. Without the trust a Grant of probate has to be obtained first. This can be a lengthy process and take months and even sometimes years. If there was no Will the delay could be very lengthy indeed.
2. The proceeds no longer form part of your overall wealth and so are not subject to tax which can amount to 40% of the proceeds.
So simply by signing a few forms, could prevent those you love from a lot of hardship and expense.
Is there a catch? No, not at all (provided the policy is not the kind that will ever acquire a surrender or ‘cash in’ value). All the documentation is standard and is provided totally free of charge by the life insurance company. Your Financial Adviser, through whom you buy the policy, should complete the documentation for you, at the time he or she arranged the policy. In the event of a claim, all you have to do is provide the details of the Beneficiaries and a Trustee or two and sign the form. Job done!
Even if your policy is designed to repay a mortgage, it should be written in trust for your partner. Then, rather than your estate receiving the money and using it pay off the mortgage, the money can be paid directly to your partner. This saves legal delays, solicitors and probate fees and loads of hassle. Your partner can then use the money to personally pay off the mortgage. Whether this also saves you Inheritance tax will depend on the value of your estate and how you have structured your Will.
Life Insurance “Written In Trust" is a must!
You might ask why isn't my policy written in trust? Good question – was the person who sold it more interested in the commission than doing a good job for you?
P.S. Always ensure that you have an up to date Will.
Inside this issue:
Barclays Capital Equity Gilt - How does the Decade look?
Written in Trust is a Must! - Robert outlines the importance of this with Life Assurances
Wealth Creation Specialist - March 2010 Newsletter
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No obligation. No spam. No junk. Totally free three month trial of our newsletter. This registration form will go straight to Robert Ayley, and he will add you to the newsletter list right away. There are no other steps, and we won’t do annoying things like email you every day, sell your email address to someone else or ask for credit card details after the trial expires - simply ask us to continue. Enjoy!BARCLAYS CAPITAL EQUITY GILT STUDY 2010
Synopsis: A better year has helped the numbers, but the decade still looks lousy.
The 55th edition of the Equity Gilt Study from Barclays Capital was published last week. The Study, which incorporates UK and US investment data going back to 1900, is widely used to provide statistics about the wisdom (or otherwise) of long-term equity investment.
A summary table of real (i.e. net of inflation) annual gross returns to the end of 2009 is shown below:
| Period
|
1 Year
|
5 Years
|
10 Years
|
20 Years
|
50 Years
|
| UK Equities
|
25
|
3.3
|
-1.2
|
4.6
|
5.2
|
| Gilts
|
-3.3
|
2.1
|
2.6
|
5.4
|
2.3
|
| £ Corporate Bonds
|
15.8
|
0.0
|
2.9
|
N/A
|
N/A
|
| Index-linked Gilts
|
3.1
|
1.4
|
1.9
|
3.8
|
N/A
|
| Cash Deposits
|
-2.1
|
0.0
|
0.8
|
1.6
|
1.3
|
Barclays do not include commercial property in their survey, but the corresponding figures based on Investment Property Databank (IPD) statistics would be 1 year: 1.0%, 5 years; -1.0%; 10 years: 3.5% and 20 years: 3.6%.
The 2010 Study underlines what a poor decade the Noughties was for UK equity investment. It did not help that the decade started at the very peak of the UK market, with the FTSE 100 at 6930.2 (about 30% above current levels) and the broader FTSE All-Share Index at 3242.06 (about 20% above current levels). However, there were two worse-performing decades in the 20th century:
· 1909-1919 which, thanks to World War I, gave average annual real return of -3.8% ; and
· 1969-1979 when the first oil price shock, among other events, left inflation averaging 13.1% pa over the decade and average annual real returns were -2.3%.
Another way of looking at the 1999-2009 experience is to note that using all 107 years of their data, Barclays calculated that over 10 year periods, UK equities outperformed cash (Treasury Bills in this instance) 91% of the time. That puts 1999-2009 firmly in the bottom decile.
COMMENT
The Barclays Capital figures may look bad, but they would have been a lot worse were it not for the sparkling performance of equities in 2009. Now, about a suitable strategy for NEST default investment funds...