Trusts and Life Insurance

Trusts and Life Insurance

How Irrevocable Life Insurance Trusts can be used to avoid Estate Duty.

Did you know that your Life Insurance Policy forms part of your Estate and is thus liable for Estate Duty deductions when you die? This means that not only do beneficiaries to your Estate have to feel the brunt of Tax on their inheritance, but also those who are beneficiaries to your Life Insurance Policies.

There is a way around this however:

  • Safeguard your Life Insurance Policy from Estate Tax
  • You can set up an Irrevocable Life Insurance Trust
  • Irrevocable Life Insurance Trusts are the beneficiaries to Life Insurance Policies
  • You can name beneficiaries to your Irrevocable Life Insurance Trust

Trusts and Estate Tax

Your Trust belongs to no-one; it is its own separate entity into which you will place your assets, and name beneficiaries to receive those assets. Thus your Trusts do not form part of your Estate, which means that they are not liable for Estate Duty.

Trusts for Life Insurance Policies

Setting up an Irrevocable Life Insurance Trust allows you to name the Trust as beneficiary to your life insurance policy, protecting it from Estate Duty. There is always a downside of course: Trusts can be expensive to setup and maintain. Understanding the costs involved between paying Estate Duty and fees versus paying Trust fees is of paramount importance in this regard: consult your Fiduciary advisor today to decide which is best for you.

Irrevocable Life Insurance Trusts for your Beneficiaries

Your beneficiaries will typically include your spouse and thereafter your dependants, which means that your Trust will behave in a very similar manner to your actual policy. You can however dictate the terms of your Trust, getting it to perform exactly as you intend. To ensure no disputes occur between your policy and Trust requires sufficient knowledge of the legal framework behind each. Consult Crest Trust today for more information.


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Crest Trust Services (PTY) Ltd. is an Authorized Financial Service Provider with FSB No: 28966