Life Policies Direct managing director Jason King says: “Trusts are often perceived by the public and advisers alike as complicated and an area to avoid. However, with the IHT threshold getting easier to breach, it is essential that this important area is not ignored.” King is not alone in believing that failing to recommend that a term policy should be written in trust is a misselling claim waiting to happen. There are many valid reasons for writing a policy in trust, not least because the policyholder can specify exactly who is to benefit and when. Writing a life policy in trust may also provide a lifeline at a vulnerable time as there is no requirement to wait for probate before the proceeds can be paid out to the beneficiaries. Where a policy is taken out to protect a family’s fin- ancial well-being, it should almost always be written in trust. Scott Walker, head of financial services at law firm Maclays Murray & Spens, believes a trust is a essential to safeguard the interests of minor children. He says: “If children are very young, we would sit down with the family and point out that the money could be paid into a trust.” What is clear, though, is that few policies use a trust. Scottish Widows says just 9 per cent of its life policies are written in trust. Widows technical support manager for IFAs Paul Templeton says: “My view is that policies should be written under trust unless there is a good reason not to.” It is obvious that many advisers do not even raise the issue with clients when discussing clients’ protection needs. The reason for this put forward by an intermediary liaison at another UK insurer is less than flattering for the profession. Speaking on the condition of anonymity, he said: “In the real world, there is no financial incentive to suggest a trust. It means more paperwork and potentially more that could go wrong.” Yet Templeton points out that IFAs would be wrong to assume that putting a life policy in trust will be laborious and time-consuming. Scottish Widows offers an e-trust service for IFAs which uses a series of questions to identify the most suitable type of trust to be used for a particular client. Templeton says the procedure takes a maximum of 10 minutes. Lifesearch senior technical adviser Kevin Carr says writing a policy in trust “takes as long as the customer needs to decide who they want to benefit and who should deal with the paperwork and then to fill in the form – so about five minutes”. King points out that life policies wrapped in with critical-illness cover can also be written in trust. He says: “If a policy includes non-death benefits, then it is important that the right trust is used so that the critical-illness benefits are retained for the policyholder’s benefit while the life insurance benefit only is gifted.” A joint policy can be writ- ten in trust where the pol- icy is geared to pay out on the death of the second spouse or to allow for the possibility – however unlikely – that both spouses may die at the same time. Indeed, the only instance where it would not be best advice to write a term contract in trust that anyone spoken to by Money Marketing could come up with was where the policy was being used against a loan. Alan Steel of Alan Steel Asset Management says anyone in a final-salary scheme will already have life benefit written in trust, which should make it easier when highlighting the merits of such arrangements to clients. His firm advises that all clients who have transferred out of final-salary schemes into section 32 plans should have their arrangements written in trust to retain the level of death protection they prev- iously enjoyed under their final-salary arrangement. One final check that conscientious advisers should make is where a new or existing client has arranged their own life cover. The client may not be aware that it could be in their interests to write the policy in trust, especially if it was taken out at a supermarket checkout or direct with an insurer over the internet. Informing a client of the potential merit of using a trust could ultimately help with client retention, as few people would not appreciate rescuing 40,000 of a 100,000 life policy from the clutches of the taxman.