What is a split trust?
For protection policies only. This information is for financial advisers only. It mustn't be distributed to, or relied on by, customers.01 December 2018
A split trust effectively combines two separate trusts in one.
- First, the trustees will hold the terminal illness and/or death benefits for the beneficiaries, other than the settlor. These benefits are known as the 'gifted benefits'. The only exception to this is for joint-life first death policies. Here, the surviving settlor will be able to benefit from the gifted benefits if they chose the survivorship option when they set up the trust. The surviving settlor would also have to survive the first settlor by 30 days for this to apply.
- Second, the trustees will hold any critical illness, income protection or total permanent disability benefits for the absolute benefit of the settlor. These benefits are known as the ‘retained benefits’. The settlor can choose for these retained benefits to be treated as gifted benefits by initialling the relevant box on the trust deed when they set up the trust. If they choose to initial this box, they’ll be giving up all rights of access to these benefits in the future.
Trusts establish legal rights and entitlements and might have material financial and tax implications for the Settlor, Trustees and Beneficiaries. Aegon UK isn't authorised to provide legal advice, so you should take your own legal advice before setting up a trust, to make sure that it meets your clients' requirements. Our trusts have been drafted for use by UK domiciled individuals.