A couple of final points in this series on wealth protection, which I think are important to consider sooner rather than later.
Use Trusts
That’s essentially it. Identify your risks, understand your current benefits, and fill the gaps. But we can’t talk about life insurance in an ultimate guide without talking about trusts.
A trust is a legal box, into which you put things like life insurance policies. If and when the policy pays out, it pays the trust which has a couple of key benefits.
Firstly, if you own a life insurance policy on your own life and you go and die, the proceeds of that policy will be paid to your estate. That means that the people who need the money can’t get it until your estate is settled, which can take months and sometimes longer.
Secondly, if you happen to be in a position where Inheritance Tax is payable on your estate, then adding the proceeds of a life policy is likely to make that problem worse and you could end up paying up to 40% of the policy proceeds away in tax, which is just pointless.
Trusts help with speed of pay-out and with tax protection – valuable benefits. Most life insurance companies offer trust forms that you can complete yourself. You will need to decide who your trustees will be – those are the people who carry out your wishes for the money, and who your beneficiaries will be – those are the people who will get the money.
Don’t put income protection policies or critical illness policies in trust, and always seek legal advice – it’s easy to get this wrong, and trusts aren’t easy for laypeople to get their heads around. It’s a specialist area so you should always seek advice.
Make a Will
While we’re talking about seeking legal advice, while you’re thinking about what happens when you die, take this opportunity to make a will. It’s something that all of us put off, but we know we shouldn’t. Many people take the view that it’ll all get sorted out somehow and they won’t be around to worry about it, so why bother.
If you’re thinking that, go find a mirror and give yourself a stern talking to. By not making a will, you’re making the lives of those left behind considerably harder than it needs to be at an already unimaginably challenging time. If you have financial dependents, then not having a will is inexcusable.
I have a deal with Farewill which gets you 20% off any wills written by them and they’re already extremely good value compared with your average high street solicitor. Find out more here. Don’t be cheap, don’t be thoughtless – make a will now. I’m watching you – do it now!
Call LifeSearch
Farewill will sort out your will for you, and LifeSearch are the best people I know in the UK for helping you sort out your wealth protection cover. I’ve been sending listeners to LifeSearch for two years now and all the feedback I’ve had has been superb.
They’ll never try and sell you cover you don’t need. They’ll help you to understand the benefits you already have, and they’ll help you to balance cost and benefit so you end up with a brilliant programme of wealth protection, which is, crucially, affordable for you. Learn more here.
Full disclosure, the deal with LifeSearch is an affiliate arrangement so I get some of the commission that they receive when you take out a plan through them. It doesn’t cost you any more though and by using my link you will go straight through to their senior advice team, so you know you’re dealing with experts.
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