"Using trusts protects beneficiaries from the nightmare of vital funds being locked up in probate, which makes them a crucial pillar of the advice brokers should be giving consumers."
- John Scrivens - Stonebridge
Stonebridge has revealed that almost three times as many protection policies are now being placed in trust compared with five years ago.
This comes as more advisers try to prevent payouts from becoming stuck in probate, Stonebridge says, and follows the FCA’s Pure Protection Market Study final report, which highlighted how the regulator wants to help increase use of preparatory tools including trusts and nominated beneficiaries, allowing claims to be paid out more quickly.
The FCA calls foreseeable friction at the claims stage the "beneficiary gap", where funds fail to reach the intended recipients quickly and effectively.
Unless life policies are held in trust, the payouts enter probate with the rest of the policyholder’s estate. This has led some firms to increase use of trusts, where appropriate to client circumstances, particularly where immediate access to funds will help a beneficiary avoid hardship or financial difficulty.
According to analysis of its sales data, Stonebridge has seen the number of life policies written in trust rise from 5.3% to 14.3% in the last five years with one of its six key providers. The rate of adoption appears to still be on the rise, increasing from 13.1% one year ago. Network-wide, Stonebridge’s advisers place closer to 25% of policies in trust on average.
The proportion of policies placed in trust cannot always be compared between providers because of demographic and product variables.
READ MORE: Sickness acts as driving force for older employees leaving workforce
"When people choose policies, they are often solely focused on the amount of cover, but their loved ones need the money in their pocket in order to benefit from it. Time can be a real factor," John Scrivens, sales director at Stonebridge, said.
"Using trusts protects beneficiaries from the nightmare of vital funds being locked up in probate, which makes them a crucial pillar of the advice brokers should be giving consumers.
"All too often, funds are withheld from the bereaved in their time of need because a trust wasn’t considered when the policy was taken out. Fortunately, times have changed, and advisers are increasingly conscious of the circumstances in which trusts are most appropriate and their benefits.
"We’ve been banging this drum for a long time, and it has rightly been identified by the FCA as an important focus area. The industry will be better for it, and consumers won’t be left needlessly vulnerable. Policies shouldn’t be placed in trust automatically, but we’re pleased that our network members are identifying increasing numbers of cases where trusts should be used."
