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What is a Life Insurance Trust in Ireland?

A life insurance trust is a legal document that allows you to control how the proceeds of your life insurance policy are distributed after your death. There are many reasons to effect Life Insurance in a Trust, For instance, to avoid probate (the process of affecting your Will), protect your beneficiaries, and ensure that your wishes are carried out.

Estate Planning is more than just a fancy phrase….

Did you know that without proper estate planning, your children may not receive the proceeds from your life insurance plan?

Estate planning goes beyond simply purchasing a life insurance policy. It involves creating a comprehensive strategy to distribute your assets according to your wishes and to minimize potential complications or disputes. Without a clear plan in place, the distribution of your life insurance proceeds may be subject to legal problems and delays.

How Does a Life Insurance Trust Work?

A life insurance trust is a three-party arrangement. The first party is the settlor, who is the person who creates the trust. The second party is the trustee, which is the person who manages the trust and distributes the proceeds to the beneficiaries. The third party is the beneficiaries, which are the people who will receive the proceeds of the trust.

When you create life insurance in trust, you will need to transfer ownership of your policy to the trust. This means that the trust will be the owner of the policy, and the beneficiaries will be the owners of the proceeds.

After your death, the trustee will distribute the proceeds of the policy to the beneficiaries according to the terms of the trust. This means that you can specify exactly how you want the proceeds to be distributed.

Why Use a Life Insurance Trust?

There are a number of reasons why you might want to use a life insurance trust. Some of the most common reasons include:

To avoid probate: Probate is the legal process effecting your will. It can be a time-consuming and expensive process, and using a life insurance trust can help you avoid it.

To ensure that your wishes are carried out: If you don’t have a life insurance trust, your life insurance proceeds will be distributed according to the terms of your will.

If you have no will or trust things can get messy…

In Ireland, if you pass away without a valid will (intestate), the laws of intestacy determine how your estate is distributed. It is important to note that life insurance proceeds are not automatically exempt from intestacy laws. Without a will or Life Insurance Trust, the proceeds of any life insurance plan are distributed as per the law of succession(Like I said, messy!!).

However, if you have life insurance in trust, you can say exactly how you want the money to be split.

For example, if you have young children, you may want to use a life insurance plan to provide for their education and other needs. Setting your plan up in trust can ensure that the proceeds of your Life Insurance are used for the benefit of your child, even if you are not able to leave a will.

What are the disadvantages of writing a policy in trust?

Life Insurance plans in Trust cannot be assigned to lenders for mortgage purposes. So, If you need Life Cover for Mortgage Protection purposes then Life Insurance in trust is not for you.

Significant Life events may cause the need for you to review or change the trust. Then again the same could be said for your will!

How to Set Up a Life Insurance Trust

Setting up a life insurance trust is a relatively simple process and can be done when you are initially setting up your cover afterward.

The first step is to name the beneficiaries of the trust. You can name anyone you wish as a beneficiary, including your spouse, children, grandchildren, etc.

The second step is to transfer ownership of your life insurance policy to the trust. This can be done by completing a form provided by the insurance company or one drafted by your solicitor.

Finally, review, review, review….

Remember, estate planning is not a one-time task. Once your Life Insurance in Trust has been set up, ensure you review and update your plan regularly, especially when major life events occur. By taking proactive steps to secure your family’s financial well-being, you can have peace of mind knowing that your life insurance proceeds will be distributed according to your intentions. You can ensure necessary support for your loved ones during a difficult time.

A life insurance trust is a valuable tool that can help you protect your beneficiaries and ensure that your wishes are carried out after your death.

It is always advisable to speak with a solicitor when thinking about this type of protection plan. I can work with your solicitor and together we can get your cover in place.

Check out our testimonials:

Finally, If you have any questions in relation to this you can reach me personally on 01 582 3523 or email me at Aidan@financiallife.ie

Thanks for reading


Disclaimer: The information provided in this blog post is for informational purposes only and should not be considered professional advice. It is advisable to seek expert financial advice for personalized guidance regarding life insurance.


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