Two-fifths of people have never heard of writing a life insurance policy into a trust, however, more than eight in 10 have assets they want to pass on, research by Legal & General has revealed.
The significant lack of awareness surrounding the legal arrangement of writing a life insurance policy into a trust, which allows a person to gift their policy to beneficiaries when they die, has been totalled up as £99.98bn worth of risk for UK customers.
Legal & General based the total figures on an average life insurance payout of £39,000 multiplied by the six million policies in the UK.
According to Legal & General, 40% of people are unaware of the process, while 82% have policies they would like to pass on and 43% do not have a will in place.
"It's certainly tempting to avoid thinking about the future, but it's essential to remember our responsibility to our loved ones," said Craig Brown, director, Legal & General Intermediary. "As this research shows, there is a genuine risk of leaving them exposed and vulnerable to financial difficulty unless people get their affairs in order beforehand."
A trust, which allows a policyholder to indicate to whom - and when - the proceeds of the life policy will be paid out, is a crucial way to protect family members from the financial burden of IHT by helping to ensure this money is not included as part of the dead person's estate.
Peace of mind
Those who do not place a single life insurance policy into a trust risk their money not going to their chosen beneficiaries - for example where the policyholder is not married and has not made a will.
"By speaking with an adviser and putting a life insurance policy into a trust or making a will, policyholders will have much greater security," added Brown. "Knowing that their family will be covered in the case of unforeseen circumstances will not only give policyholders greater peace of mind but will also ensure that their loved ones gain the maximum benefit from their insurance policy."
Funding the national insurance fund
Longer-term incentives needed
Will streamline process for consumers
£102m total asset growth
AMC 0.30%, OCF ranges from 0.56% to 0.64%