What are the rules about relevant life policy trustees and beneficiaries?
If you’re taking out a relevant life policy for an employee, then there are some key duties that will need to be assigned and positions that need to be filled.
Namely the trustees of the policy, and the people who will be named as the beneficiaries.
For both roles in the relevant life policy, there are some essential points to think about and rules to follow in terms of who can be involved, what they need to know about their duties, and what those duties are.
It’s also important to clearly establish the beneficiaries of the policy to reduce the possibility of confusion or contesting in the case a claim is made.
First, let’s look at the roles and rules around a relevant life policy trustee.
Who can be named as a trustee?
If you’re setting up a policy for an employee, then you will automatically become a trustee of the policy as their employer. If you don’t want to be named as a trustee, then you can opt-out by completing the appropriate section of the trust deed.
Your employee will also be automatically named as a trustee on the policy.
Up to three more trustees can be appointed.
In theory, it is possible for anyone over the age of 18 to be named as a trustee. But in practice most people choose close friends or family members, or at least people whose judgement and decision making they would trust to carry out the duties properly.
Some people choose a solicitor as a trustee due to their professional experience.
What does a trustee have to do?
Whoever is chosen as a trustee will legally own the trust fund and must look after it in the best interests of the beneficiaries. If a claim is made for a death in service, then the trustees will be responsible for passing the funds to the beneficiaries when the time comes.
As part of managing the trust, trustees are responsible for keeping accurate records of the amount of money in the trust over time and making sure that any tax liabilities are paid out in the event a claim is made.
Due to the importance of the management of a trust, all trustees must be trusted to understand the powers and responsibilities they have, including the rights of the beneficiaries.
They can also not profit personally from their role as a trustee and any decisions must be made and agreed by the trustees as a group.
Who can be a beneficiary?
The employee themselves can be a beneficiary of the relevant life policy – this is mostly so they can get access to the finance in the case of a critical illness and they’re no longer able to continue in the business.
Employees typically choose their immediate family or specific members of their extended family or civil partners in the case of a death in service claim.
Some also name their children or grandchildren as beneficiaries.
In theory, though anyone can be named as a beneficiary.
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