So, I’ve been thinking about putting my life insurance in trust, but not sure how it works or if it’s worth it. Like, I know it helps with inheritance tax and stuff, but are there any downsides? Anyone here done this before?
Yeah, I did that a while back. The main benefit is your life insurance payout doesn’t go through probate, so your family gets the money faster. Plus, it’s not counted as part of your estate, which can help avoid inheritance tax. But once it’s in trust, you can’t change your mind. It’s pretty much locked in.
@Ren
Wait, what’s probate? And why does it take so long?
Rey said:
@Ren
Wait, what’s probate? And why does it take so long?
Probate is the legal process of proving a will and settling an estate. It can take months, even years sometimes, especially if there are disputes. With a trust, your beneficiaries get the payout quicker since it skips that step.
I haven’t done it yet, but I’ve been looking into it. It seems like a good way to make sure the money goes to who you want without delays. I read something about different types of trusts though—like discretionary vs. absolute. Can anyone explain the difference?
@Foster
Sure! So, a discretionary trust gives your trustees flexibility—they can decide how much each beneficiary gets, and even change who gets the payout. An absolute trust, on the other hand, is set in stone. The beneficiaries are named, and it can’t be changed later.
@Foster
Oh, that’s super helpful. I was thinking of going with a discretionary one so my trustees can adjust based on who needs what. But I guess the downside is that it’s out of my control once I set it up?
Yeah, exactly. You have to really trust your trustees because they’re in control once you’re gone. I went with an absolute trust because I wanted to make sure the money goes to my kids directly, no changes.
@Haven
Makes sense. I think I’d want more control. What happens if both me and my partner pass away at the same time though?
Blaze said:
@Haven
Makes sense. I think I’d want more control. What happens if both me and my partner pass away at the same time though?
If you have a joint policy and both die within 30 days of each other, the trust can pay out to your kids or whoever your beneficiaries are. But if your partner survives longer, they’ll get the money first.
Don’t forget, if you’re not married, putting your life insurance in trust is really important. If you’re just cohabiting, your partner wouldn’t have any legal right to your estate without a trust.
Shan said:
Don’t forget, if you’re not married, putting your life insurance in trust is really important. If you’re just cohabiting, your partner wouldn’t have any legal right to your estate without a trust.
Yeah, that’s what my lawyer told me. Common-law couples don’t have the same rights as married ones. So putting life insurance in trust ensures my partner gets the payout if something happens to me.
There’s no extra cost to set it up either, which is nice. I did mine with Legal & General, and it didn’t cost anything extra. Just make sure you keep your trustees in the loop so they know where the paperwork is.