A life insurance trust is the best option, especially for those looking in the over 50's life insurance market because of the advantages a trust offers in saving tens of thousands in inheritance tax. If you have decided to choose a trust, the choice of trustees can be vital and you as the settlor must be secure in your choice. As the settlor, you have the right to be one of the trustees, if you have optioned for a joint life insurance policy, both you and your partner will be settlors equally within the trust. Most, if not all financial advisors will advocate that there should be two trustees at any one time at least, though you can name as many as you desire in reality. In the event all the trustees die, the trust does not also die but carries on, meaning the exemptions from Inheritance Tax (IHT) are still in place. However, the trust must now go through probate to re-administer it, meaning fees and a lengthy wait while it is completed, negating one of the advantages of having a trust in the first place. Therefore one desired quality of trustees is they be no older than you and be in hearty shape.
So what other qualities should your desired trustee have? Right, legal thresholds to being a trustee first, the nominated trustee must not be or recently have been bankrupt, be mentally capable and be older than 18. Character traits to look for are someone who has common sense, is orderly and can spare the time to govern the trust, as it can be a time consuming task even for an uncomplicated trust. Beneficiaries must be kept informed; paperwork on any investments must be kept organised and kept up to date while at the same time keeping in line with the obligations of the trust as written and agreed. As when the trust matures, the trustees need to rationalise any spending to the beneficiaries, so the more complete and structured a person is the better.
Importantly, you should be confident the trustees you pick would make the choices you would make, or at least have no qualms following the guidelines you set down, for this reason, it is important you have a detailed will to reinforce your desired objectives for the trust. As the trustees must abide by the instructions in the will; it will also have the additional bonus of helping the trustee when you have passed away, as they can back up their explanation of your wishes with documented proof if any of the beneficiaries feel hard done by the trust and will target the trustee, when they could not have changed what was arranged in the will. An example, if you have younger children you wish to provide for, within the will you can direct the trustees to release funds to make sure the children are sent to a private school, the trustees have no choice but to follow what amounts to a directive.
Who should I elect on to be a Trustee? The obvious candidates for being a trustee are close friends and family, yet there can be some dangerous downsides to choosing a friend or family member. The advantages are obvious, they'll know what you would want when you pass on and you will probably already have a good idea if they are capable of the task. Alternatively, the negatives could result in bias towards particular family members/beneficiaries which could lead to challenges on the trustees' authority. The trustee could also be a beneficiary, leading to a clash of interest in the executing of the trust, lack of prejudice is fundamental to being a trustee as they can be a lightning rod for any grievances beneficiaries might have, it's something your probable trustee must be prepared for. You must remember that the trustees you choose will be handling large sums of money, so it can be risky if you choose trustees who won't have experience of handling such large sums, maybe even investment if that's what you plan for your trust, odds are your family members won't have this experience.
It will be advised in some cases that you have one nonaligned trustee who can be seen as not holding a bias towards any of the beneficiaries; this might be the family solicitor. Other possibilities to be a trustee is a professional, such as doctor, priest or teacher which you could also class as only being an acquaintance, your financial adviser will probably suggest having a trustee that is completely apart from friends/family/beneficiaries so they are neutral, a professional would be desirable for this. It's possible to hire a professional trustee, the advantages of this route are they will be experienced in financial investment (if that's your aspiration for the trust), particularly if you have set up a discretionary trust. The trust you establish will no doubt span decades, during that time the friends or family you place as trustees can't be expected to keep up with any change in trust law, a professional trustee's job is to know about these changes and what impact it will have on the trustee. Professional trustees, and your solicitor if you choose them, will command a fee for their services, while you may think it's cheaper having a friend or family member be a trustee, they might need outside counsel on financial planning or accounting if they're not experienced enough to deal with finances.
If you decide to look for a professional trustee, search for one with a TEP qualification (Trust and Estate Practitioner), as it is a recognised qualification around the world, your financial advisor can point you in the right direction if you would like to search for one. It does not need to be said it's wise to have an open discussion before hand with your selected trustee, even to treat it as an interview to make sure you are making the best choice. If you have to establish guardianship for your children, it's best not to have the guardian and trustee as the same person as short term objectives will become dominant over long term objectives of the trust, it also acts as a healthy checks and balances system, ensuring you children's wellbeing would be secure and that of the trust.
Different trustees for different trusts? If you still cannot decide on whom to pick as a trustee, what type of trust you want to establish could help narrow down the field for you. For example, you might just want your life insurance to be paid out in a lump sum or have payments on your death (Term or Mortgage Protection Life Insurance) and if it's clear who the beneficiaries are, the job as trustee is easier than being trustee of a Discretionary Trust (DT). Under a DT, the trustees retain "Power of Appointment" and therefore have more freedom on how to process the trusts finances. A trustee can manage investments themselves or delegate to someone else, though they retain the only say on distribution to the beneficiaries.
While the trustee must use the finances for the good of the trust, there is no official check to what the trustees can do with the assets. For all trusts not just DT's, a trustee is not personally responsible for losses as long as they don't exceed the total amount within the trust; they are responsible though for losses over the trusts total amount. For example, if the trust loses 120,000 and the trust only had 100,000, the trustees are accountable for 20,000. Trustees have no legal right to be paid (though professional trustees will have a written deal to be paid), so if you have chosen a friend or family member, it's usually good form to leave a small sum for them in the trust as a goodwill gesture. It also has the supplementary bonus of making them more careful with investments for the trust. It's recommended that trustee's don't make any imprudent and perilous investments, instead going for conventional and sturdy growth.
If you're speculating why a DT has been explained, it is to show what skills a trustee will need to run a trust and hopefully help you pick your trustees. It can be hard work and depending on your wishes, knowledge in certain areas may be needed. So as you can see, picking a trustee is not about just picking your best friend, brother or partner, you have to make a calculated long term decision to create the secure future for your loved ones.
Author Resource:- Visit JustLifeInsurance.com for more Life Insurance Advice, including specialist Over 50's Life Insurance Advice, or to find Life Insurance Quotes that fits your personal circumstances.
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Another top article giving advice on a subject there is not a lot on out there on the world wide web. Top marks again to the JustLifeInsurance.com team.
