Beneficiary nomination

For personal and business policies

  Only for use with personal policies.

  Personal and business versions are available.

For joint ownership policies

  Only for use with single owned, own life policies with life cover (life or life and critical illness).

  Can be used for joint as well as single owned policies.

Can be added to a policy at anytime

  As beneficiary nomination forms part of the policy contract, it is added during the application process and before the policy goes on risk.

  A trust can be added at any time during the policy life cycle, except for Relevant Life Cover and some business policies which need the trust to be in place before the policy can go on risk.

Avoids probate

  When a beneficiary nomination is in place, after death the nominated beneficiaries have  ownership of any claim amount. The amount payable on death does not form part of your client’s estate and does not need to go through the probate process.

  The assets in the trust do not become part of your client's estate, so do not need to go through the probate process. 

May be suitable for Inheritance Tax purposes

  If the amount payable on the death of the policy owner is made to the nominated beneficiaries, this payment will not form part of the estate, and Inheritance Tax (IHT) is not normally payable.  

For amounts payable to the policyholder during their lifetime, please refer to the section ‘Critical illness, terminal illness or children’s cover claims paid to policyholder’ below.   

If a primary aim of the policy is to fund an inheritance tax liability and/or to ensure the entire proceeds are available to the family/unmarried partner after death, a trust which excludes the policyholder from accessing the illness benefits is more suitable.   

It is important that your client seeks suitable advice about the suitability of beneficiary nomination for IHT planning.

  Some trusts are designed primarily with IHT planning in mind. Where all the policy benefits are payable to the beneficiaries, they usually fall entirely outside the IHT estate/s of the settlor/s. The IHT position can be more complicated if some benefits are carved out for the settlor/s. It is important that your client seeks suitable advice about the suitability of trusts for IHT planning.

Consider for complex estate planning scenarios 

  Beneficiary nomination is designed for simple scenarios. For complex cases such as beneficiaries who are minors or tax planning is a priority, we suggest using a trust.

 Suitable for complex estate planning.

Policyholder remains sole owner of policy

  The policyholder maintains ownership. It is only the death benefit which is passed to the beneficiary (or any other claims made and not paid before death e.g. critical illness or terminal illness). The nominated beneficiaries have no rights while the policy owner is alive.

  The policyholder becomes the first trustee with more trustees appointed. All trustees become policy owners.

Revocable later

  Once beneficiary nomination is in place, it cannot be removed. However, the policyholder can change nominations of beneficiaries throughout the life of the policy as circumstances change.

  A trust is normally irrevocable, although there are circumstances where the policy can be removed from the trust.

Superseded by a trust or beneficiary nomination

  Although you cannot remove beneficiary nomination, it can be superseded by placing the policy in a trust that excludes the Settlor and their estate from the death benefit. Where appropriate, beneficiary nomination could be set up until a trust is fully considered. Once a trust is in place, it is not possible to revert to beneficiary nomination.

  Once a trust is in place it cannot be superseded by beneficiary nomination.

Can be superseded by a will

  A will cannot supersede the beneficiary nomination because the proceeds cannot be accessed by the policyholder or their estate. It makes no difference whether the will was written before or after the policy was created.

  A will cannot supersede the trust because the proceeds cannot be accessed by the policyholder or their estate. This is the same as with a beneficiary nomination.

Policyholder can change policy

  As policy ownership is not transferred, the policyholder can make changes throughout the term of the policy without obtaining consent from others.

  As policy ownership is transferred to trustees, authority is usually required by all trustees to make any changes to the policy.

Critical illness, terminal illness or children’s cover claims paid to policyholder 

  If the policy payment amount is paid to the policyholder as a terminal illness, critical illness or a child cover claim and not used, this may form part of their estate upon death and may be subject to IHT. It is important that your client seeks suitable advice about the suitability of beneficiary nomination for IHT planning.

This is dependent on the type of trust used. The beneficiary of any payment of any terminal illness, critical illness and children’s cover claim payments will be as directed by the terms of the trust. If a split trust is in place, these amounts would normally be carved out for the policyholder during their lifetime.

Discretion on who to pay

  There is no discretion for beneficiary nomination and we have a contractual obligation to pay as per the most up to date beneficiary details we have received.  

It’s important that your client reviews their beneficiaries regularly as their circumstances change. There must be at least one beneficiary and no more than five beneficiaries at any time.  

Your client can call us on 0345 030 6572 to let us know of any changes.

Trustees may have discretion depending on the trust e.g. discretionary trust.