How Setting Up a Section 72 Policy in Trust Can Benefit You

When it comes to estate planning, one of the key concerns is how to reduce the tax burden for your beneficiaries. A Section 72 life insurance policy is designed to help cover inheritance tax (CAT) liabilities. But did you know that by placing your policy in trust, you can gain even more advantages?

Here’s how setting up a Section 72 policy in trust can benefit you and your loved ones:

1. Faster Payout – No Probate Delays

One of the most significant benefits of setting up your policy in trust is avoiding the delays associated with probate. The proceeds from the policy can go directly to the beneficiaries or trustees, ensuring that funds are available quickly to settle any tax bills.

2. Protection from Creditors

By keeping the policy separate from your estate, it can protect the proceeds from creditors’ claims, ensuring the funds go where they’re needed most: covering inheritance tax or helping your loved ones.

3. Control Over Who Gets the Payout

When you establish a trust, you can specify exactly how you want the proceeds to be distributed. This can be particularly important if you have complex family dynamics, special requirements, or simply want to ensure the funds are used wisely.

4. Privacy

Unlike probate, which can be a matter of public record, a trust keeps the details of the policy and its payout confidential. If maintaining privacy around your financial affairs is important, this is a key benefit.

5. Maximize Tax Efficiency

The primary goal of a Section 72 policy is to cover the inheritance tax liability. By holding the policy in trust, you ensure that the payout goes directly toward this purpose and isn’t counted as part of the taxable estate.

How to Set Up a Section 72 Policy in Trust

Setting up a Section 72 policy in trust requires some planning, but the process is straightforward:

Consult with a Legal and Financial Expert – It’s essential to seek advice from a solicitor and financial advisor to ensure the trust meets your needs.
Choose the Right Type of Trust – Depending on your goals, you may opt for a bare trust (where beneficiaries get automatic ownership) or a discretionary trust (where trustees have more control over the payout).
Appoint Trustees – You’ll need to choose individuals who will manage the trust and ensure the funds are used correctly.
Assign Beneficiaries – These are the individuals who will benefit from the policy proceeds. The trust document will specify who these beneficiaries are.
Draft the Trust Document – A solicitor will help you create a trust deed outlining the terms and conditions of the trust.
Assign the Policy to the Trust – The policy must be formally transferred into the trust.
Review Regularly – Life changes, and so might your estate planning needs. Review your trust periodically to ensure it still aligns with your goals.

Conclusion

Setting up your Section 72 policy in trust can provide significant benefits, from faster access to funds to greater control over distribution and protection from creditors. If you’re considering a Section 72 policy or would like to learn more about placing one in trust, get in touch with us at section72.ie. We can help guide you through the process and ensure your loved ones are protected.

If you would like to have a chat about how you can effectively plan for this inevitable tax and how best to protect the assets that you have worked hard to build, all while reducing the overall tax bill, please get in touch with a qualified advisor today.