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					Trusts
Notes for guidance




 Please note that these explanatory notes are intended for
 guidance only and you should take specialist legal advice
 before entering into any binding trust arrangement.
                                                                                                     Has the policy
                                                                                                      been issued
                                                                          NO                                                            YES


                                         Trust request                                                                                                            Trust deed




                           Do you want to give the trustees                                                                                     Do you want to give the trustees
                           flexibility to choose beneficiaries?                                                                                 flexibility to choose beneficiaries?


                          NO                                 YES                                                                               NO                                  YES


                      Fixed trust                        Flexible trust                                                                    Fixed deed                          Flexible deed




      Is the policy CIC with life?                        Is the policy CIC with life?                                     Is the policy CIC with life?                         Is the policy CIC with life?


         NO            YES                                    NO           YES                                                NO            YES                                     NO           YES


                    Do you want to                                      Do you want to                                                   Do you want to                                       Do you want to
    Whole                                                Whole                                                          Whole                                                  Whole
                  retain CIC benefits?                                retain CIC benefits?                                             retain CIC benefits?                                 retain CIC benefits?




Trust request,          NO      YES                Trust request,           NO      YES                               Trust deed,             NO     YES                    Trust deed,           NO      YES
 fixed whole                                       flexible whole                                                     fixed whole                                         flexible whole


                     Whole           Split                                Whole          Split                                            Whole           Split                                Whole           Split




                      Trust request, fixed split                           Trust request, flexible split                                      Trust deed, fixed split                            Trust deed, flexible split
1. Glossary                                                                        2. A basic structure
   • settlor                                                                                              Settlor
   the person/people who set up the trust




                                                                                                          ➜ ➜
   • beneficiary                                                                            Transfers property to the trustees

   the person/people who will or may benefit from
   the trust
                                                                                                         Trustees
   •   trustee




                                                                                                          ➜ ➜
   the person/people who hold the trust property in
                                                                                         Hold property subject to the trust rules
   accordance with the trust rules


   • trust property                                                                                   Beneficiaries
   the assets which are placed in trust by the settlor




                                                                                                          ➜
   or any other assets which accumulate to the trust,
   e.g. interest on trust monies
                                                                                        Receive the trust property when the trust
                                                                                       rules direct or allow the trustees to pass the
   • declaration of trust                                                                             property to them
   the original declaration by the settlor creating
   the trust                                                                        Trusts of life policies are usually created either by
                                                                                    using a trust request or a trust deed. Both will specify
   •   trust rules
                                                                                    the trust rules under which the trustees will hold the
   the detailed provisions of the trust which specify,                              property but the two differ in how the policy is placed
   among other things, how the trust property will                                  in trust. A trust request must be used where the
   be held by the trustees, who the beneficiaries will                              policy does not exist at the time the request is made.
   be, when the beneficiaries will become entitled to                               The settlor, in proposing for the policy, requests that
   the trust property, how income will be distributed                               the life insurer issues the policy subject to the terms
   and any other rules relating to the management                                   of the trust. When the policy comes into existence it
   of the trust                                                                     is issued to the settlor who is the proposer under the
                                                                                    trust and the settlor becomes the first trustee.

                                                                                    Once a policy has commenced it cannot be issued
                                                                                    subject to a trust request. This is because the life
                                                                                    insurer cannot alter the terms on which the policy
                                                                                    was issued. After a policy has been issued a trust
                                                                                    deed must be used to place the policy in trust. This is
                                                                                    because the deed is needed to transfer the legal title
                                                                                    to the policy. The trust deed sets out the rules of the
                                                                                    trust and transfers ownership of the policy to the
                                                                                    trustees by assignment. Bupa provides standard trust
                                                                                    forms for clients to use to place policies in trust.
                                                                                    Both trust requests and trust deeds are available.
                                                                                    Please contact 0845 600 3122*, option 4 for copies of
                                                                                    these forms
*BT landline calls to 0845 numbers will cost no more than 3.95 pence per minute.
Charges from other providers may vary and calls from mobiles usually cost more.
3. Bupa trust forms                                              policy it will mean that the settlor will not receive
                                                                 any payment following a critical illness claim.
  Bupa provides standard trust forms to allow clients
  to place Bupa schemes under trust. As these                  3.1.2 Trust Request, Flexible (Whole scheme in trust)
  documents are in a standard form clients are advised           This document will create a flexible trust. This is a
  to ensure they are appropriate for their needs and             trust where the settlor will specify a group of
  to seek legal advice to confirm this. All of the trust         potential beneficiaries (by reference to their
  forms will exclude the settlor from taking any of the          relationship with the settlor) and give the trustees
  policy benefits, except for any critical illness benefit       the power to choose who out of this group will
  where a split trust is used.                                   benefit from any proceeds of the policy. The trust
                                                                 provides that any appointment of a beneficiary must
3.1 Trust requests
                                                                 be made within 80 years of the date of the request
  Bupa provides a number of standard trust request
                                                                 and the settlor will set out who the beneficiaries will
  documents to cater for different scenarios. As stated
                                                                 be if the trustees fail to make an appointment.
  above trust requests are only appropriate where a
                                                                 Once the trust is effective the group of potential
  proposal for a policy is being made and the policy has
                                                                 beneficiaries can only be extended in accordance
  not yet been issued. Where the policy has not been
                                                                 with the rules of the trust. The trust will hold all the
  issued the trust request will place the policy under
                                                                 policy benefits for the beneficiaries of the trust and
  trust as soon as the policy is issued. If a policy has
                                                                 the settlor will not be able to obtain any benefits or
  already been issued a trust request will have no effect.
                                                                 use the policy in any way which does not represent
  The trust requests provide fixed and flexible trusts           a benefit for the beneficiaries. If this trust request is
  and cater for the situation where a settlor wishes to          used for a critical illness with life policy it will mean
  retain the critical illness benefits on a critical illness     that the settlor will not receive any payment
  with life policy. As the trust request will create a           following a critical illness claim.
  trust where the initial trustee(s) are the settlor(s)
                                                               3.1.3 Trust Request, Fixed (Split trust)
  and proposer(s) a deed of appointment of additional
  trustees should be completed at the same time as               This document will create a fixed trust as described

  the request. This deed should be in the form                   in 3.1.1 above. The trust differs from the one

  prepared for use with trust requests. The trust                described in 3.1.1 as it will allow the settlor to retain

  request documents are as follows.                              an interest in any critical illness benefit paid. It can
                                                                 only be used for critical Illness with life cover
3.1.1 Trust Request, Fixed (Whole scheme in trust)               schemes. The trust splits the benefits under the
  This document will create a fixed trust. This is a trust
                                                                 policy to place the critical illness benefits in trust for
  where the beneficiaries are identified in the original
                                                                 the settlor and all other benefits under a fixed trust.
  trust and their entitlement to a share in the policy is
  specified by the settlor at the outset. Once the trust       3.1.4 Trust Request, Flexible (Split trust)

  is effective the beneficial interests cannot be                This document will create a flexible trust as

  changed without the agreement of every beneficiary             described in 3.1.2 above. The trust differs from the

  (and all beneficiaries must be over 18). The trust will        one described in 3.1.2 as it will allow the settlor to
  hold all the policy benefits for the beneficiaries of          retain an interest in any critical illness benefit paid.
  the trust and the settlor will not be able to obtain           It can only be used for critical illness with life cover
  any benefits or use the policy in any way which does           schemes. The trust splits the benefits under the
  not represent a benefit for the beneficiaries. If this         policy to place the critical illness benefits in trust for
  trust request is used for a critical illness with life         the settlor and all other benefits under a fixed trust.
3.2 Trust Deeds                                               available to provide for removing and adding
  Bupa provides standard trust deed documents for             trustees, for appointing trustees to trust requests
  the same scenarios as those for which trust request         before a policy is issued, to make appointments of
  documents are provided. The trust deeds differ from         beneficial interests under flexible schemes and to
  the trust requests as they can only be used where a         assign a policy to a beneficiary who becomes
  policy is in existence before the trust deed is             absolutely entitled to a policy. As with all the trust
  executed. As a deed the signature(s) of the settlor(s)      forms only standard forms are available and those
  must be witnessed, and this should be by someone            using them will need to ensure they meet there
  who is not a beneficiary of the trust. When using a         needs, taking legal advice if appropriate. Bupa is not
  trust deed the settlor does not need to be a trustee        able to provide any forms to meet the requirements
  (although it is usual for them to be one) and               of individual clients which are not met by these
  additional trustees can be appointed in the deed.           standard forms and legal advice should be sought in
  The trust deed documents are as follows.                    these cases.

3.2.1 Trust Deed, Fixed (whole scheme in trust)
                                                            4. Critical questions
  This document will create the same trust as the
                                                            4.1 Request or deed?
  trust request fixed whole scheme described in 3.1.1
                                                              A trust request is used when the policy does not yet
  previous page. It differs from that document in that
                                                              exist and a client wants the trust to apply from
  it is used for an existing policy rather than with a
                                                              commencement. When the policy is issued the
  proposed policy.
                                                              settlor, as sole owner, will become the first trustee
3.2.2 Trust Deed, Flexible (Whole scheme in trust)            and additional trustees can only be appointed using
  This document will create the same trust as the             a deed of appointment which becomes effective
  trust request flexible whole scheme described in            after the policy is issued. A trust deed is issued when
  3.1.2 previous page. It differs from that document in       a life insurance policy already exists and ownership
  that it is used for an existing policy rather than with     of the policy must be transferred.
  a proposed policy.
                                                            4.2 Split trust or whole scheme in trust
3.2.3 Trust Deed, Fixed (Split trust)                         A split trust can be used with insurance policies that
  This document will create the same trust as the             include life and critical illness benefits. It will enable
  trust request fixed split scheme described in 3.1.3         the life cover benefit to pass to the named
  previous page. It differs from that document in that        beneficiaries while still allowing the settlor to retain
  it is used for an existing policy rather than with a        the critical illness benefits. With a whole scheme in
  proposed policy.                                            trust the settlor retains no interest in the property

3.2.4 Trust Deed, Flexible (Split trust)                      but places it in trust in its entirety. A whole scheme

  This document will create the same trust as the             in trust wording can be used for life policies or life

  trust request flexible split scheme described in 3.1.4      and critical illness policies where the settlor does not

  previous page. It differs from that document in that        want to retain the critical illness benefits.

  it is used for an existing policy rather than with a
                                                            4.2 Fixed or flexible?
  proposed policy.
                                                              With a fixed trust the settlor names the beneficiaries
3.3 Additional Trust Forms                                    and the value of their individual share in the
  Additional forms are available to assist settlors and       property from the outset. This is binding and cannot
  trustees in the administration of schemes. Forms are        then be changed at a later date. A flexible trust
enables the settlor to name a list of potential
beneficiaries but empowers the trustees to decide
who will benefit. Trustees may hold the property for
up to 80 years, after which it must pass to the
beneficiaries nominated by the trustees or, if there is
no nomination, the default beneficiaries named in
the trust.
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                                                                       PBHA/4143/JUL05-2L

				
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