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Absolute trust (split trust)
For Protection
Our Absolute Trust (Split Trust) clearly defines the beneficiaries and their share at outset. The beneficiaries cannot be changed once the trust has been set up. For this reason, a discretionary trust is usually more appropriate, to allow for changes in circumstances.
This is also a split trust meaning the life assured, or settlor, retains an interest in the policy allowing them to receive any benefits from a critical illness claim and from a terminal illness claim where applicable. The trustees hold the death benefit for the beneficiaries of the trust.
Key Benefits
- Beneficiaries and their shares are clearly defined.
- Benefits are paid free from Inheritance Tax (IHT).
- A client can keep the right to receive critical illness and terminal illness benefits, whilst ensuring the benefits payable on their death are dealt with efficiently.
Key documents
Absolute Trust (Split Trust) (PDF)
See all our trust documents in one place, including forms, guides and brochures.
Other information you need
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Absolute trust (Split Trust) may be suitable for clients:
- who want a trust designed for use with life assurance policies where the policy includes critical illness and/or terminal illness cover
- who want a trust that works in the same way as any other absolute trust in that specific beneficiaries are named to receive the benefits held under the trust
- who are happy that once the trust has been set up, the beneficiaries can’t normally be altered, even if circumstances change.
In the event of a claim for terminal illness or critical illness, any payment will be made to the trustees for the benefit of the life assured or settlor.
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- If the only purpose of the policy is to provide funds for the chosen beneficiary(ies), for example, a disabled dependant.
- The policy proceeds will not form part of the settlor’s estate and will be free from IHT, including entry, periodic and exit charges, should the trustees be holding the benefits for a prolonged period of time. For example, until a child reached an agreed age.
- The benefits are generally paid to the beneficiaries quickly, provided there is a surviving trustee, as the benefits are not included in the settlor’s estate and probate is avoided.
- A client may use this when they want someone else, such as their children, to benefit from the policy on their death, whilst ensuring proceeds resulting from illness are still payable to themselves.
- If the only purpose of the policy is to provide funds for the chosen beneficiary(ies), for example, a disabled dependant.
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If you have decided that a Absolute trust (Split Trust) (PDF) is suitable for your client please send us the completed and signed trust documentation as soon as possible. We cannot treat a benefit as being under trust until we have received the relevant documentation.
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
Important considerations
Trusts are documents with legal significance that may affect the rights, obligations and tax position of your client and the beneficiaries. You should not proceed unless you are satisfied that you understand its effect and that it achieves your objectives. If you have any doubts or uncertainties you should seek the appropriate legal guidance. Special consideration may be required where persons are either resident or domiciled outside the UK.