Trusts 'best option for life insurance'

Life insurance policies written under trust are paid out far quicker than those that are not, new research indicates.

A study by insurer Standard Life found that policies written under trust can be paid out up to six months before other policies. Only an estimated one in ten life assurance policies are set up in this way despite such policies usually being paid within three to five days.

Some other policies can take as much as six months to pay out in the event of death, but the report claims that life insurance written under trust is paid out faster and can also minimise inheritance tax and ensure the money is paid to the right people in family disputes. Using a trust means that there is no wait for the grant of probate or confirmation, which can take up to six months after the customer dies.

The analysis of recent claims paid by Standard Life suggests that the reason for low uptake of policies written under trust is a "lack of understanding of the benefits of trusts and concerns that they may be complicated to set up". The insurer suggests that all single life protection policies should be written in trust, unless there is a clear reason not to do so, and has urged the public and advisors to adopt the use of trusts as standard practice.

Julie Hutchison, estate planning specialist at Standard Life, said: "People should ask themselves why they would not put their policies in trust rather than questioning the need to do so. Trusts and life assurance policies should go hand in hand."

She added: "A bereaved family may not be best pleased if they have to wait months for a claim to be paid or find up to 40 per cent of the payout going to the taxman when advice at the outset about a simple trust could have avoided the situation. It's simple to use a trust and can avoid much heartache later on."