One potential downside is that if you use an Absolute or Bare Trust, once the trust is set up you cannot change the beneficiaries so if for example you fell out with one of the named beneficiaries of the absolute trust they will get the money on your demise and you cannot change this. Use a Discretionary Trust and if there is Critical Illness involved please make sure a split trust is used.

Generally trusts are advisable for the reasons given before.

However, a word to the wise. If the annual premiums to the life assurance plan are over £3,000 per annum you may need to prove that the premiums are easily affordable from your income and do not diminish your standard of living or the premiums may become subject to Tax. This is quite unlikely unless we are talking about a whole of life plan.

A second point to be aware of is that you should ensure that there is no cash in a discretionary trust at the 10 year point. This would only happen if the life assured died before the 10th aniversiary, and this does happen, then the policy proceeds are paid into the trust from the insurance company but not distrubited to the beneficiaries before the 10th anniversiary of the trust. You could face a periodic charge and an exit charge, but again this is very unlikely.

As well as appointing trustees that you trust, also try to ensure that they are significantly younger than the life assured so there would be a high probability of them surviving the life assured.

A discretionary trust, as the name suggests, means that the proceeds are paid to the beneficiaries at the discretion of the trustees. A nomination of beneficiaries is usually made by the life assured and generally the trustees do follow this. However if you are planning on leaving funds to your kids then best make all of them trustees to avoid arguments later (although this would be one argument that you can't get dragged into as it will only kick off after you've kicked the bucket!)

These are really the only potential downsides of using trusts for life assurance plans I can think of at the moment; but I am full of man flu so there could be more that are escaping me.

Hi Oranges

Any drawbacks that could be found by putting the policy into trust are absolutely minor in comparison to the advantages of putting the policy into trust.

By putting the policy into trust you can speed up the claim payout by months. If it is not in trust then you will have to go through Letters of Administration or Rules of Intestacy which can take anything from 3-12 months. By putting the policy into trust it means on death the policy is no longer yours and so does not go into your estate but passes to the Trustees. They get the required docs from the coroner (death certificate) and pass onto the Life SAssurance company who should then payout within a week to 2 weeks.

There is also the advantage of removing the sum assured from your estate which makes it ineligible for Inheritance Tax.

You IFA is speaking wisely by recommending using a trust. There is no cost involved and the FSA highly recommend them on any sort of Life Assurance policy nowadays and I insist on them for all my clients (there is no extra financial benefit to the adviser) as it can relieve alot of stress around something that never comes at a good time

For single life plans it is usually best to write them into trust. You need to make sure you name trustees that you 'trust' (i.e. brother, sister, god parent etc.). With a discretionary trust you can usually name your beneficiaries anyhow.

Your query is circumstantial dependent.. to obtain an accurate reply it should be addressed to the IFA, who should be in a position to advise on any possible drawbacks based on your disclosed personal situation.

Hi I have been shopping around for life assurance and have spoken to a few IFAs and one of them advised putting the money into 'trust'. Although i know the main advantage of this, are there any drawbacks and anything i should be aware of? thanks