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One of the most important decisions when searching for critical illness insurance in UK and drawing up a life and critical illness insurance policy is determining the beneficiaries. In most cases this is the next of kin, generally a spouse and any children. You also need to determine how it is going to be paid, and one option is to ensure it goes directly to the beneficiaries by using a life and critical illness trust. A trust has several advantages. First, it is separate from the estate so it is not part of the probate process and can be paid right away. Usually beneficiaries will receive payment from a life and critical illness insurance trust about six months sooner than if it went through the probate process. This is very important, particularly if the policy holder was the main income source for the family. A life and critical illness cover trust will give your beneficiaries needed funds faster so they can pay bills and living expenses.
Life and Critical Illness Trust - Life and Critical Illness Insurance Trust- Life and Critical Illness Cover Trust
Another reason for using a trust is to avoid taxes. When your claim payout goes to a life and critical illness trust fund, it is outside your estate and will, and so not subject to inheritance taxes. While spouses and civil partners who live in the UK are exempt from the inheritance tax, other beneficiaries may have to pay it if the funds are outside a trust and exceed the inheritance tax level. This is very important because you want your family to receive as much as possible to pay bills and the mortgage.
When you designate that your claim payout goes to your critical illness insurance trust, you may be able to opt for a flexible trust. A flexible trust, more often used in life insurance, allows you to change the beneficiaries and trustees whenever you want, which is helpful if your personal relationships change over the term of your life and critical illness cover trust policy.
It is crucial that you get professional advice when getting any critical illness cover in UK and designating trust funds. Both insurance and financial advisors can help you get the right level of coverage and ensure your claims are paid to your loved ones if needed.
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