THE ASSURANCE TRUSTTM
The Assurance Trust was designed to deal with the following problems that advisers and clients face:		The Trust Drafting ProcessTM Frequently Asked Questions Application form

Adviser problems
When an adviser uses an insurance company’s trust, it is the adviser that is responsible for the trust working. This means that using the trust creates a long term risk to the adviser and their practice. Even noting that the client should obtain independent legal advice is no protection for the adviser, a point confirmed by the ombudsman.

Client Problems
When a claim is made on insurance, the insurance falls into the clients estate. This causes the following problems:

• The insurance is liable for IHT
  
• Probate must be obtained before the insurance can be obtained
  
• When passing to a surviving spouse, the assets fall into their estate and will be included in any future “re-marriage” estate
  
• IF a re-marriage ends in divorce then the funds will be included in the divorce settlement
  
• If the beneficiaries are made bankrupt the funds will be included in the bankruptcy order
  
• If the beneficiary receives means tested benefits, these will be affected by receipt of the insurance

The Assurance Trust immediately removes all of these problems.

The Assurance Trust is written as a Discretionary settlement that has been designed by our consulting Solicitors and settled by Counsel.

The Assurance Trust gives the trustee the “discretion” between beneficiaries. The trust is set up with the standard three classes of party. The person creating the trust is the settlor, the person or persons who are due to receive the proceeds are the beneficiaries and the person holding the assets is the trustee.

The settlor sets out “classes” or “categories” or people who will benefit. These can be “My brother John Smith” “My children Paul Jones and Martin Jones” etc. but can also be corporations or companies. It will be the trustees job to decide who gets what from the trust within the categories.

For example, if you left the proceeds to “My children Paul Jones and Martin Jones” the trustees would have to pass the benefits to your children. However, it would be up to the trustee to decide how much each child received and when. It is the “discretion” that give the flexibility that is usually required in the event of death, simply because you do not know what will be happening at that time.

The Assurance Trust has been specifically designed by our consulting Solicitors and settled by Counsel to meet the criteria of our clients. Each trust is individually drafted by Wills & Trusts Independent Estate Planning Ltd and certified by the Solicitor. This means that, unlike using an insurance company’s own “fill in the blank” style trust you will have a fully bespoke trust that meets your requirements and is certified with independent legal comment.

The Assurance Trust is designed to hold the benefits from insurance company contracts that include life insurance. The trust pulls the benefits away from the clients estate so that the benefits are held by the trust, and not by the estate. This means that, in the event of death the proceeds can be paid out without the grant of probate. Even more important is that fact that the funds will be outside of your estate and so not liable for Inheritance Tax and, even more importantly, protected from divorce & re-marriage.

However, another very important point is that the proceeds held within the trust can be retained outside of the beneficiaries’ estate. This means that, in the event of death of the person insured, the proceeds will be held in the trust and used by the beneficiaries, but without the proceeds falling into their estate. This can potentially avoid another layer of Inheritance Tax which is payable in the event of the beneficiaries death. The assets can remain in the trust for up to 80 years (21 years after the death of the Settlor – in Scotland), thus providing the same protection for the clients children and grand children.

Trustees
As you can see the appointment of trustees is very important. The trustees will not only have control of the funds from the policies upon a death claim, but will also decide when the beneficiaries receive the funds. Your clients need to think long and hard as to whom they would feel comfortable appointing as trustees. There must always be a minimum of two trustees and a maximum of four. The Settlor can also be a trustee of the trust.

Beneficiaries
When deciding on beneficiaries it is important to remember the control that the trustees will have. You will be deciding on classes of beneficiaries from which your trustees will decide. The more classes included the more flexibility the trustees have when it comes to disburse the funds held in the trust.