Consumers risk losing £99.98bn because their life insurance policies aren’t written into a trust, Legal & General found.
Some 82% of consumers have assets they wish to pass on to loved ones in the event of a claim, but two-fifths (40%) have never heard of placing their life insurance policy under trust. Worryingly, more than four in 10 (43%) consumers said they didn’t have a will in place.
Craig Brown, director, Legal & General Intermediary said: “It’s certainly tempting to avoid thinking about the future, but it’s essential to remember our responsibility to our loved ones.
“As this research shows, there is a genuine risk of leaving them exposed and vulnerable to financial difficulty unless people get their affairs in order beforehand.
“By speaking with an adviser and putting a life insurance policy into a trust or making a will, policy holders will have much greater security.
“Knowing that their family will be covered in the case of unforeseen circumstances will not only give policy holders greater peace of mind, but will also ensure that their loved ones gain the maximum benefit from their insurance policy.”
A trust is a legal arrangement that allows an individual to indicate who they want the proceeds of their life policy to be paid to and when.
This can ensure that children or any other chosen beneficiary receive financial support from the money, but will not have full access to the lump sum.
It should also help to ensure that any money paid out from the life policy will not be part of the estate of the person covered, helping to minimise inheritance tax.
For example this means that their spouse, co-habiting partner or family members will be protected from the heavy financial burden of inheritance tax.
It will help to ensure that the money paid from the life policy can be paid to the right people quickly, without the need for lengthy legal processes.
Those who do not place their single life policies in trust risk leaving their loved ones in a vulnerable situation since the proceeds may not go to the chosen beneficiaries as planned.
For example, if the policy holder is not married and has not made a will, there is a risk that their co-habiting partner will not be legally entitled to any of the lump sum which could leave them in financial difficulty.