PROTECTION POLICIES IN TRUSTS

Helping you choose which protection trusts best suit your client.

Trusts explained

A trust can be an extremely effective financial planning tool and essentially is a legal arrangement that lets the owner of something ‘gift’ ownership to someone else, this could include cash, property, shares or a life insurance policy.

These arrangements allow the person making the gift (the settlor) to transfer ownership of their assets to another party (the trustees). The trustees hold the assets for either the sole benefit of a chosen person or group of people (the beneficiary) - without giving them access to the assets for the time being.

Who is involved in setting up a trust

There are normally three parties involved in setting up a trust:

  • The settlor – this is the person who creates the trust. They will appoint trustees to administer the trust and decide who the beneficiaries of the assets will be.
  • The trustees – these are the people the settlor chooses to hold and manage the assets, according to the terms of the trust, for the sole benefit of the beneficiaries.
  • The beneficiary – this is who the settlor wants to benefit from the assets held under trust.

Everything that is done with the trust assets by the trustees must be in the best interests of the beneficiary.

How a trust works

  • The settlor – transfers ownership of his or her asset(s) to another party creating the trust.
  • The trustees – become legal owners of the asset(s) and administer it for the benefit of the settlor’s chosen beneficiaries.
  • The settlor – will be a trustee and should appoint additional trustees.
  • The beneficiary – may benefit from the asset(s) under the trust at a future date.

For further information on trusts, including some key questions and answers, please see our Trust Overview Guide (PDF)

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Which trusts to use

For Scottish Widows Protect policies we currently offer a choice of six supporting trusts.
The trust chooser below is designed to help you decide which trust may be most appropriate for your
clients' needs. 

  • This is a simple diagram about  Business Protection choices.
What is your business client’s cover need?
If it’s Relevant Life, Relevant life must be written in trust using a Relevant Life Cover trust.
If it’s shareholder, loan of key person trust?
 Your client may want to consider using a business trust.

    *This will be suitable for new ‘Own Life’ single life, death benefit policies with or without critical illness cover. It may be appropriate to consider setting up a separate option agreement, dependent on circumstances. We can provide a draft document for use by a legal adviser in drawing up any suitable agreement.

This is a diagram that helps you choose which protection policy in trust is right for your client

Does your client want to have the flexibility to change their beneficiaries?

If yes, they can choose a Flexible Gift Trust  (Discretionary), or a Flexible Trust (Split Trust). The Flexible Gift Trust  (Discretionary) might be right if your client has applied for Whole of Life Cover or Critical Illness Cover. It may also be right for them if they have applied for Life Cover or Life with Critical Illness cover and they do not wish to retain any Terminal Illness and or Critical Illness benefits. The Flexible Trust might be right if your client has applied for Life Cover, or Life with Critical Illness cover and they want to retain Terminal Illness and, or Critical Illness benefits.

Does your client want to have the flexibility to change their beneficiaries?

If No, they can choose a Fixed gift trust or Absolute trust  (Split trust). The  Fixed gift trust might be right if your client has applied for Life Cover, or Life with Critical Illness cover and they want to retain Terminal Illness and, or Critical Illness benefits. The Absolute trust  (Split trust)  might be right if your client has applied for Whole of Life Cover or Critical Illness Cover. It may also be right for them if they have applied for Life Cover or Life with Critical Illness cover and they do not wish to retain any Terminal Illness and or Critical Illness benefits.

How to submit a trust

Our trust forms are editable PDFs. This means that you can complete them online and email to your client for them to print and sign.

Completed, signed and dated, trust forms can be sent to us either by email (a scanned copy or even send a photo) or by post.

Please remember to include the relevant plan number and ensure that the form has been signed and dated.

Email: Protect@scottishwidows.co.uk
Address:

Scottish Widows Protect Servicing Team
15 Dalkeith Road
Edinburgh
EH16 5BU

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