MBE 2011: Writing life policies out of trust is not TCF

Speaking at Mortgage Business Expo in London today Kevin Carr, chief executive of protection Review, said advisers who didn’t give clients the option of writing policies in trust to help them get beneficial inheritance tax terms were “not doing their jobs properly”.

He said: “There are three things here: firstly, directly sold policies won’t mention it, why would they?

“Secondly advisers who write life policies out of trust are being lazy and are not doing their job properly and three, is it TCF? Of course not. If clients could have been saved 40% tax they have every right to complain and who are they going to complain about?”

Industry consensus agrees that around 90% of life policies probably should be written in trust but less than 10% are.

Mark Graves, sales director at Pink, said part of the problem was that every provider had a different trust procedure making it “cumbersome” for advisers to know how to put their clients’ policies in trust.

He added that the TCF aspect was a grey area for networks because writing life policies in trust “is best practice but there is no hard and fast rule from the FSA on it”.

Graves said there was also a lack of knowledge among mortgage brokers about the inheritance tax benefits of putting life policies in trust.

He said: “We have been whacking that drum at Pink because educating brokers about trusts is vital. But it’s complicated and cumbersome as a procedure so knowledge and training is what’s needed.”

Meanwhile Peter Brodnicki, chief executive of Mortgage Advice Bureau, said: “The issue of brokers not writing policies in trust is now a massive focus for us because providers and networks in the past haven’t made it a priority for brokers to focus on.”

He added that MAB advisers were in the process of going back over their existing client books and looking at whether policies should be written in trust that weren’t originally.

Brodnicki argued this is an opportunity for all advisers because life policies written in trust improves retention and is better for the customer.

Carr added: “It’s fascinating the number of advisers who complain about people leaving and churn of life policies but they don’t write policies in trust which helps improve persistency.”