Investment Bond PackageProduce an Investment Probate Trust and Deed of Assignment of a Bond

Why would my clients want their Investment Policies assigned to Trust?  

Many people want to feel that they have something to fall back on in their later years and so build up their savings throughout the years.

Of course there is a vast range of investment types available in the market place. A common recommendation made by authorised financial advisers to clients is that of a ‘Life Assurance Bond’ also often referred to as an Investment Bond. 

A ‘Life Assurance Bond’ is generally a single premium life insurance policy. They have a small element of life insurance that is paid out on death. However, it is an investment product rather than an insurance product. Of course such an investment is part of the policy holder’s estate, and on their death, it would be subject to the deceased’s Will (or Intestacy if there is no Will).

On death, the administration of an estate is legally required to be completed by the Executors of the Will (Administrators if no Will). This process (known as Probate, or Letter of Administration if no Will) can potentially be complicated, timely and a potentially costly exercise. Furthermore, until it is completed, technically no intended beneficiary can benefit from the deceased’s estate. In some cases this can be financially devastating to a beneficiary. Furthermore whilst alive, the client’s estate can become subject to claims upon them. Such issues could be: Divorce, Creditor claims, Long term care fees. 

So to reduce the risk of these issues could the Life Assurance Bond Policy Holder give the asset away so they no longer own the asset? 

Naturally a client can give an asset away ‘absolutely’. That is gifting it to other person(s). However, invariably the Policyholder would want to retain the use of the investment so giving it away leaves the control of the asset wholly with the new owner(s). Furthermore the asset is then in the recipient’s estate, leaving it at risk from their divorce, creditor claims, care fees and potentially Inheritance Tax. So arguably not an option for many to consider.

Is there an alternative to gifting the asset away ‘absolutely’?

Yes! With the use of Pilot Trust(s)’. 

The policyholder can establish the Trust ‘now’, whilst they are alive. They would be the Settlor of their own Trust. The Settlor can also choose to maintain control of the Trust assets by virtue of appointing themselves as a Trustee, ideally with Professional Trustees to help them. Similarly, if the Settlor still wishes to continue to benefit from the Trust assets then they can be specified as a ‘Potential Beneficiary’ as well. Being referenced as someone who can still benefit from the Trust, would not aid reducing the Settlor’s estate value for their Inheritance Tax (if applicable), but for many this may not even be an issue to them.

On establishing the Trust, the Settlor whilst alive, would then ‘assign’ their Life Assurance Bond(s) to the ‘Trust’. ‘Assigning’ assets is the administration process of transferring the legal ownership of the asset from the Policyholder to the Trustees of the Pilot Trust. A ‘Deed of Assignment’ is required to do this which is signed by the Settlor and Trustees of the Trust and then sent to the Life Company.

So why ‘assign’ your Life Assurance Bond to Trust whilst alive?

Access on death: The house will need to be maintained! Where are the family going to find the money to do that throughout the weeks/months/ years that the Grant of Probate may take to be obtained? Whilst other assets are frozen the Trust assets will be readily available to all other Potential Beneficiaries of the Trust on death of the Settlor. That is, the assets won’t be delayed by the Probate process. Of course it will be the surviving Trustees to continue to manage the Trust assets.

Assets are ring fenced prior to the death and post-death which means protection from divorcing Beneficiaries, third party claims and bankruptcy, for example.

Protection: The assets are also protected from depletion in value while we wait for the Grant of Probate.

Assets available to Beneficiaries immediately waiting for the Grant of Probate will not delay access to these funds. In some cases the Grant of Probate might not even be necessary.

Reduced Costs for Probate: Subsequently with not being part of the Probate process, the potential cost of Probate will be lower than if the assets were part of the deceased estate to be directed by their Will/ Intestacy.

Management of the assets by the Trustees: If it is felt the existing investment is to be encashed whilst the Settlor is alive, then this can be considered by all the Trustees rather than just the original Policy holder. If it’s felt appropriate to encash the investment, then the proceeds would still be Trust assets, and not assets of the Settlor. It is vital that the Trustees gain appropriately written authorised financial services advice in these circumstances.

Management of assets if mental capacity lost: Should the Settlor lose mental capacity then the remaining Trustees are able to continue to manage the Trust assets, without the potential limitations imposed on Attorneys appointed in a Property & Financial Lasting Power of Attorney (or Enduring Power of Attorney for Northern Ireland).

giving money

As with all Trusts, invariably they are only as good as the appointed Trustees. The Trustees role is often underestimated so it is vital the Settlor appoints appropriate Trustees. It is always a strong recommendation to appoint Professional Trustees to assist the efficient management of the Trust assets.

But won’t the money in the client’s bonds still be attackable if they were to enter care?

There is no guarantee, but should the original Settlor be subject to long term care the Trust assets could potentially be protected from such claims. Each case would be considered in its own merits but arguably there is more protection with the assets being held ‘upon Trust’ than not.

The Care and Support Statutory Guidance, Annex B, Para. 55 states: "Where an investment bond includes one or more element of Life Insurance Policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights must be disregarded as a capital asset in the financial assessment."

This means that any liquid assets held in this particular kind of Investment Bond cannot be assessed for Care (Subject to the rules concerning Deliberate Deprivation - See below). As both the Settlor and Beneficiary of the Trust you have access to the Trust assets (i.e. the Investment Bond) at all times.


Deliberate Deprivation is the term used when someone knowingly gives away assets such as income or savings, or sells them at less than their market value, in order to qualify for benefits. If someone has deliberately deprived themselves of monies, the Local Authority may assess the person as having ‘notional’ capital or income. In practice, the ability of the Local Authority to do this depends on how much time has elapsed between transfer of assets and the requirement for Care.

If you are new to the industry or this is the first time you have heard about the use of full Discretionary Trusts and would like to learn more about how using Discretionary Trusts can help you with your client’s planning, Countrywide run regular training courses and webinars which cover this subject and much more.

If you are interested in attending a training day or a webinar then please contact us through this website.

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