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A lack of trust

Placing protection policies in trust is a logical financial planning move, so why does it happen in only 6% of cases, asks David Carrington, marketing director, Personal Touch Financial Services

The trauma of having a family member or close friend pass away is often incredibly stressful and can leave those that are left behind with a huge burden, having to make arrangements for funerals and close down accounts held in the person’s name. But often what makes the situation even more unbearable are the complications and additional anxiety caused by someone dying without a will – referred to as intestate.

Whilst there are many more average examples of the damage that dying intestate can cause, one of the most shocking is probably that of Jimi Heseldon, the millionaire owner of the company that makes the Segway Scooter. He died intestate with an estate worth over £290m but because he had not made a will, instead of his estate being divided up in accordance to his wishes, it was equally divided by his wife and four children.

Mitigating stress and financial loss
According to a recent survey by a staggering 58% of the public still do not have a will in place and in 2009 60% of deaths were intestate. Clearly there is a huge need for financial advisers to ensure that they help educate clients in this important area and indeed there are many things a good adviser can do to help mitigate a client’s stress and potential financial loss.

Placing protection plans in to trusts, for example, is a very simple way of helping protect dependents and indeed trusts represent a really vital component of any good financial planning strategy.

Top 5 reasons for using trusts

Research conducted by Aviva claims that the top five reasons why advisers should consider using trusts for this purpose include:

1. Speed of payment – avoiding probate delays
2. Trustee control – allowing the benefits to be divided in accordance to the settlors’ wishes
3. Ease intestacy rules – trustees can so what the deceased would have wanted
4. Mitigate IHT risk – lowers the clients risk of paying 40% IHT rate
5. Good advice to clients – demonstrates TCF and provides a quality service

Despite what may appear to be a very logical planning move, surprisingly only 6% of protection plans are currently placed in trusts. Reasons given for this include the additional paperwork and administration required, lack of knowledge and just a pure concern around the amount of time this would take.

The good news is that placing protection plans into trust is now much simpler and easier with an increasing number of providers supplying online trust forms – where a client signature is not required and allowing a policy to be placed into trust as soon as a case is submitted. Great inspiration then to ensure all advisers put their client’s needs first and help relieve a great deal of unnecessary stress at the same time.

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