What you need to know about Trust Planning

Trust planning is an important but sometimes overlooked part of organising people's financial affairs. In general terms, a trust is designed to provide a legal instrument to control the way your assets are passed to others. Despite the many benefits which trusts can provide, they can be complex and expert advice is essential.


What you need to know

If a protection policy is not written under trust, the following problems can potentially arise:

  • As the policy forms part of the deceased's estate, the proceeds cannot be paid until the executory have obtained confirmation of estate or probate.  This can take a long time and cause an unnecessary delay before the beneficiaries receive the proceeds of the policy.
  • If the policyholder has not made a will, their estate including the proceeds of the policy will be distributed according to the rules of intestacy. These may well not coincide with the policyholder's intentions and may lead to the policy proceeds being passed to people other than those the policyholder intended.
  • On death, the proceeds of the policy will form part of the policyholder's estate and consequently may be liable to inheritance tax.

By effecting the policy subject to a suitable trust, the policyholder will ensure the proceeds are available quickly and usually free from any liability to inheritance tax.

The purpose of any protection policy is to provide financial security on the death of the policyholder for his/her chosen beneficiaries.  A trust is a means by which the proceeds of the policy can be passed to chosen beneficiaries in a speedy and tax-efficient way.  The parties involved when a protection policy is issued under trust are as follows:

  • Settlor: The name given to the policyholder creating the trust and is the person who normally pays the premiums under the policy.
  • Trustees: The trustees are the legal owners of the policy who exercise control over it for the trust beneficiaries.  When the trust is created, the settlor automatically becomes a trustee and names additional trustees to help administer the policy.
  • Beneficiaries: The beneficiaries are the people chosen by the settlor when the trust is created who will, or may possibly, benefit from the policy.


Anyone over the age of 18 and of sound mind can act as a trustee, even if they are also a beneficiary under the trust.  Normally, at least one additional trustee should be appointed by the settlor, to ensure the policy can be quickly dealt with when it becomes a death claim.


  • While alive, the settlor is a trustee and will advise the additional trustees as to their wishes in respect of the policy.  The additional trustees must consider any changes suggested by the settlor and acknowledge them.
  • When the settlor dies, the surviving trustees will be responsible for claiming the policy proceeds.  With simple trusts, the wording of the trust will direct payment to particular beneficiaries in specified proportions.  In the case of a discretionary trust, the surviving trustees will need to consider whether the settlor would still have wished the named default beneficiaries to receive the policy proceeds.

Normally, the beneficiaries may have an immediate financial need for the policy proceeds.  In these circumstances, the trustees will distribute the policies proceeds directly to them.  If there is no immediate need to pay the policy proceeds to the beneficiaries, a discretionary trust will allow the trustees to invest the policy proceeds on behalf of the beneficiaries.

If the trustees decide to continue the trust, they must ensure that:

  • They invest in a proper manner
  • Investments are managed in accordance with the trust
  • Appropriate records are kept
  • Tax returns are completed and submitted to HMRC

McCreas can assist in reviewing any existing protection policies and advise if it would be appropriate to place these in trust and what type of trust.

Existing plans already in trust should be regularly reviewed to ensure the intended beneficiaries are still as originally set in place.

We can help you with the complexities of Trust Planning in a way that meets your overall aims and objectives. If you would like to arrange an initial free no-obligation meeting you can do so by calling us on 0141 572 1340 or by emailing enquiries@mccreafs.co.uk.

You can also visit our website for information on our Trust Planning Services.

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