1. July 2014 Trusts and life insurance

2. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

3. For adviser use only. Not to be shown to retail customers. Learning Outcomes Understand basic features of trusts Identify benefits of putting life insurance into trust Recognise the difference between bare, discretionary and split trusts Understand the responsibilities of the parties involved Have an overview of the Ageas online trust process

4. For adviser use only. Not to be shown to retail customers. Protection Challenges 2014 Price driven market resulting in lack of perceived value around advice process Lack of customer loyalty & high lapse rate Lack of customer referrals Regulatory requirements to demonstrate good customer outcomes Potential Solution -Trust Planning

5. For adviser use only. Not to be shown to retail customers. What is a Trust? A formal transfer of property Any type of property - Shares - Buildings - Cash - Life insurance policies For the benefit of another person or people Similar to a will but specific to an asset or assets A way of choosing who will receive the benefit of a certain asset, without giving them full and immediate control

6. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

7. Settlor Beneficiaries Trusts – Key parties involved Trustees For adviser use only. Not to be shown to retail customers.

8. Settlor The settlor is the person who sets up the trust and transfers property into it. The settlor will appoint trustees to administer the trust and decides who the beneficiaries will be. If the settlor wants to put a life assurance policy in trust, it must be a policy that they own Responsibilities - Settlor Settlor

9. For adviser use only. Not to be shown to retail customers. Trustees The trustees are the legal owners of the property held in a trust. Their role is to: deal with the assets according the settlor’s wishes manage the trust on a day-to-day basis decide how to invest or use the trust’s assets If the trustees change, the trust can still continue, but there must always be at least one trustee. * Their main duties are set out in Section 1, Trustee Act 2000 Responsibilities – the Trustees Trustees

10. For adviser use only. Not to be shown to retail customers. Beneficiaries The person/people who will receive the assets from the trust There might be more than one beneficiary, such as a whole family or defined group of people. They may benefit from: The income of a trust only – i.e. from renting out a house held in a trust The capital only – i.e. getting shares held in a trust when they reach a certain age Both the income and capital of the trust Responsibilities – the Beneficiaries Beneficiaries

11. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

12. For adviser use only. Not to be shown to retail customers. Why use Trusts? – right money, right hands, right time………….

13. For adviser use only. Not to be shown to retail customers. Its estimated the government raised £3.3 billion in IHT revenue in 2013/14 The inheritance tax threshold is currently £325,000 Frozen until at least 2017/18 Any assets left to a spouse or registered civil partner, provided they’re UK-domiciled, are exempt from inheritance tax. A spouse’s inheritance tax allowance is increased by their partner’s unused allowance Right money

14. For adviser use only. Not to be shown to retail customers. However…. Life assured is single Jointly-owned by an unmarried couple Jointly-owned and the couple die together or soon after each another Could potentially be IHT to pay at 40% on some or all of the life cover Right money

15. For adviser use only. Not to be shown to retail customers. Right hands - Intestacy laws Estate valueHave a lawful spouse with no surviving relations Spouse and childrenSpouse no children but with surviving relations Not married + children Not married with relatives Not married with no relatives £250,000 or less Spouse gets everything Partner receives nothing The Crown More than £250,000 Spouse gets everything 1. Spouse gets: £250,000 + has a life interest only on half of the remaining sum (it must be invested and they can only spend the interest earned on it) 2. Children get: Anything over £250,000 immediately + their remaining parent’s share upon the parent’s death Spouse gets everythingChildren receive everything If the children die before the parent, then the grandchildren would inherit their share The estate is shared equally amongst the surviving relatives in order of HMRC beneficiary listed priority The Crown More than £450,000 Spouse gets everything As above1.Spouse gets £450,000 immediately 2.Spouse gets half the balance 3.The other half goes to remaining relatives in order or priority Parents /Siblings Children receive everything If the children die before the parent, then the grandchildren inherit their share The estate is shared equally amongst the surviving relatives in order of HMRC beneficiary listed priority The Crown

16. For adviser use only. Not to be shown to retail customers. Spouse potentially gets less of the life cover than anticipated. No provision for an unmarried partner Unintended recipients which could potentially cause family disputes Can leave undesirably large sums of money to children who can access when they become adults The whole amount can go to the crown Right hands

17. For adviser use only. Not to be shown to retail customers. Probate is a legal document. Receipt of probate is the first step in the legal process of administering the estate of a deceased person Grant of Probate normally comes through in about six weeks but often takes significantly longer If a life assurance plan is in trust, it is no longer part of the settlor’s estate so therefore probate is not required as the funds are paid directly to the trustees to distribute the funds Right time

18. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

19. Types of trust For adviser use only. Not to be shown to retail customers. Settlor interested trust Spousal bypass trust Reversionary trust Accumulation trust Mixed trust Split Trust Source: https://www.gov.uk/trusts-taxes/types-of-trust Bare trust Interest in possession trust Discretionary trust

20. For adviser use only. Not to be shown to retail customers. Bare trust Aliases - Simple, plain or absolute Settlor decide –Who the beneficiaries are –What they will receive The settlor cannot benefit from a bare trust Not possible to add or change beneficiaries Possible to change a trustee, but only with agreement of all other trustees Property and profits belong to beneficiaries Trustees can not make any beneficiary over the age of 18 wait for the assets Bare trust

21. For adviser use only. Not to be shown to retail customers. Discretionary trust Relies on the discretion of the trustees Very flexible in its provisions and how it is applied –The beneficiaries can be changed (add or remove) –The trustees can be changed (add or remove) – must be at least one other than the settlor(s) –The gift can be spread amongst various people in different proportions Trustees may be able to decide: –how much income and or capital is paid out, if any –which beneficiary to make payments to –how often the payments are made –what, if any, conditions to impose on the recipients Discretionary trust

22. For adviser use only. Not to be shown to retail customers. Split trust Does exactly what it says - it splits out the different types of cover within a single policy. Normally only used with a life and critical illness policy Any claim from the policy whist client is alive (critical or terminal illness cover) will be paid to them. Also known as retained or gifted benefits Other retained benefits are likely to be things like Income Protection, Optional Unemployment; covers that are designed to help protect the settlor’s lifestyle As with a discretionary trust, one of the risks of a split trust is the power that the trustees have Split trust

23. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

24. For adviser use only. Not to be shown to retail customers. How do I ensure the money goes to the right people? The proceeds are automatically paid to the trustees The trustees decide who receives the money and in what proportion The trust form will have a list of potential beneficiaries to whom the Trustees will distribute the funds. The default list will include…. 1.Any widow, widower of the Settlor 2.Any surviving Civil Partner of the Settlor immediately prior to the death of the life assured (providing they are not also a Settlor) 3.Any Children and any other direct descendants of the Settlor or Settlor(s) 4.The parents, brothers, sisters of the Settlor(s) and the Children of the other direct descendants of these persons 5.Any person(s) entitled under the will or intestacy of the Settlor(s) 6.Any person(s) or charity other than the Settlor(s) nominated as a beneficiary by the Settlor(s) by notice in writing to the Trustees Any individual falling outside this list who the settlor would like to benefit will need to be added as a discretionary beneficiary. Not applicable to bare trust

25. For adviser use only. Not to be shown to retail customers. How do I complete an Expression of Wishes? Not applicable to bare trust

26. For adviser use only. Not to be shown to retail customers. Who should the trustees be? Trustees Similar age to the plan owners ? Accountant, solicitor of financial adviser ? A brother, sister or close family member ? Locally based ? Financially astute ? Someone you can trust ! Will need full name and address of all trustees

27. For adviser use only. Not to be shown to retail customers. Periodic and exit charges With any non-pension discretionary trust, the trust itself can be subject to inheritance tax periodic and exit charges. Periodic charges are made if a trust has valuable assets on a 10-year anniversary. While the employee is alive and well, the value of the trust asset (the policy) will be negligible. So any charges are unlikely to happen, If the life assured dies and the claim is paid into the trust just before a 10th anniversary and there is not enough time to pay the assets out to the beneficiaries a periodic charge will arise on the value of those assets in excess of the current nil rate band at a rate of up to 6%. If the assets remain in the trust past a 10-year anniversary, there could be a potential exit charge when paid out. This will be a proportion of the last periodic charge due, again up to a maximum of 6%. However, where assets are paid out as soon as possible following a claim, there's unlikely to be any significant exit charge. And there won't be any exit charge if the assets are paid out within three months of a 10-year anniversary.

28. For adviser use only. Not to be shown to retail customers. How does the Rysaffe principle work ? On each 10 th anniversary of a trust’s creation, it is assessed for inheritance tax (IHT). There will be a 10-yearly tax charge if the value of the trust fund immediately before each 10 th anniversary is more than the prevailing nil rate band (NRB). A 10-yearly charge could arise if a claim arose and the proceeds were still held in trust immediately before the 10th anniversary. The Rysaffe strategy works by creating a series of smaller trusts rather than one large single trust - where separate trusts are executed on separate dates they are treated as unrelated transactions. However….. An updated HMRC consultation published 6 th June 2014 found the ‘splitting’ between trusts unacceptable. New rules are set to come into force from April 2015, although once in place they will be applied from June 6th 2014. This is to avoid people taking advantage of the current rules to set up multiple trusts with their own nil rate bands before the new rules come into force.

29. What are the Relevant Life trust requirements ? Relevant life policies must be written in trust The trust benefit must be paid to an individual or charity rather than the employer funding the premiums. We use a split trust so the employee can retain terminal illness benefits. Employer AND Employee will both automatically be trustees plus another Must be in trust from outset, but with Ageas Protect you can do it using our: -Online split trust declaration form, or -Paper split trust declaration form No advice will be given but assistance will be provided in completing the Trust form. It will not be possible to use the online trust when transferring ownership to a new employer as this is only available for new policies.

30. For adviser use only. Not to be shown to retail customers. Agenda Protection Challenges 2014 Key parties and responsibilities Right money, right hands, right time Types of Trust Common queries Ageas Protect and trusts

31. For internal use only. We give advisers the tools to tailor the right trust to clients’ expectations… Guide to trusts Expression of Wishes form Split Trust form Bare trust form Discretionary Trust form Online system Ageas Protect and trusts For adviser use only. Not to be shown to retail customers.

32. For internal use only. No signature required Policyholder is automatically selected as first trustee There can be an unlimited amount of Trustees per Trust. We note the policy is under trust so there is nothing to be sent in to Ageas The trust cannot be partially completed online therefore reduces errors. If trust needs to be changed, client needs to complete a paper form and send in. Trust declaration can be e-mailed or posted to client On-line trusts For adviser use only. Not to be shown to retail customers.

33. Can be completed at any point during the application process

34. For adviser use only. Not to be shown to retail customers. Online trust journey System automatically selects the correct type of trust for the policy

35. For adviser use only. Not to be shown to retail customers. Online trust journey Retained benefits as discussed earlier

36. For adviser use only. Not to be shown to retail customers. Online trust journey

37. For adviser use only. Not to be shown to retail customers. Online trust journey Settlor can be first trustee if required

38. For adviser use only. Not to be shown to retail customers. Online trust journey Address auto-search – this MUST be completed to continue. Minimum of one extra trustee required.

39. For adviser use only. Not to be shown to retail customers. Online trust journey Minimum of one potential beneficiary required

40. For adviser use only. Not to be shown to retail customers. Online trust journey PDF trust declaration can be either e-mailed or posted to client

41. For adviser use only. Not to be shown to retail customers. Learning Outcomes Understand basic features of trusts Identify benefits of putting life insurance into trust Recognise the difference between bare, discretionary and split trusts Understand the responsibilities of the parties involved Have an overview of the Ageas online trust process

42. For adviser use only. Not to be shown to retail customers. Trusts can be simple Trust process can be straight forward Trusts can add value back into your protection advice process -Assists in building long-term relationship with clients -Create referral opportunities -Provides good customer outcomes Summary

43. www.ageasprotect.co.uk Thank you