Who are the different parties involved in a trust for protection policies?
For protection policies only15 February 2017
- The settlor is the person who sets up the trust by transferring property (for example, a life protection policy) into that trust. There can be more than one settlor of a trust.
- The trustees are the legal owners of the trust fund (for example, the life protection policy). They must hold or use it for the beneficiaries. They can’t use it for their own benefit.
- A trustee can be anyone over the age of 18 who is of sound mind, however it would be unusual for someone who is bankrupt to be a trustee. Both the settlor and/or beneficiary can be a trustee, however if a beneficiary is a trustee it could lead to a conflict of interest – especially when trustees have the power to decide by how much each beneficiary can benefit.
- The beneficiaries receive the benefits from the trust fund in accordance with the trust deed and the decisions of the trustees.
- With a bare trust, the beneficiaries are set in stone when the trust is created and can’t be changed at a later stage. In contrast, with a flexible trust, the trustees can appoint the trust fund to anyone within the class of possible beneficiaries.
Trusts establish legal rights and entitlements and might have material financial and tax implications for the Settlor, Trustees and Beneficiaries. Aegon UK is not 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 requirements. Our trusts have been drafted for use by UK domiciled individuals.