Should a key person insurance policy be written in trust?

Question

I have been doing some research into key man protection and have not come across whether such cover should be written into trust for tax purposes?

Answer 1

Key person insurance is designed to pay a lump sum to the business on the death or diagnosis of a critical illness of a certain vital member of staff.

It is important to recognise this is a policy a business takes out to protect it's future profits and success of the company, the key person in question pays no premium and receives no benefit should such events arise.

Since the policy is set up on the life of another with the business paying the insurance premiums and any benefit payable being paid to the business the policy should not be set-up in trust.

This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 020 8432 7333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.