Critical illness cover and Alzheimer’s disease: Do you need to put your insurance in trust?
Alzheimer’s disease is a progressive and irreversible brain disease that gradually destroys the patient’s memory and thinking skills. When this happens, the patient is unable to carry out even the simplest tasks. Also, the disease may prevent the patient to make key decisions.
If you consider Alzheimer’s disease a distinct possibility, you can think of putting your critical illness cover in a trust. A split trust is usually one option you can use when safeguarding a life insurance policy that also has a critical illness cover.
A Background on Trusts
With a split trust, you can protect the life insurance proceeds, while at the same time ensure that the policy owner will get the critical illness insurance proceeds upon diagnosis of a critical illness. When there is no trust to protect the estate, it can delay and even reduce the life insurance proceeds that the beneficiaries can expect to get. What can happen is that the proceeds may be counted as part of the estate of the deceased and may be tied up in probate. The beneficiaries will have to wait before all debts the estate has is cleared, and this can cut down on the insurance proceeds. Also, this will make the insurance proceeds subject to inheritance tax. With a trust, the proceeds go directly to the beneficiaries and they don’t have to pay any inheritance tax on that.
When thinking about setting up a split trust, you should consult a lawyer or a trusted insurance agent who can help you ensure that the trust works the way you want it to. If you, as the policy holder, want to make sure that you get the critical illness insurance proceeds, you should make sure that the trust is set up in a way that you won’t have any problems collecting the funds, especially at a time when you will be needing it the most.
It is also important to remember that it is not as easy to cancel a trust once it has been set up. Often, the option will be to wait for the policy to stop without any benefits being paid out.
Trusts with Alzheimer’s Disease in Mind
However, you can also set the trust up in case you are stricken with Alzheimer’s disease, which can impair your decision-making. You can set the trust up so that the proceeds will be received by someone you trust and will act in your best interests.
Recommended useful information to read:
- Are you at risk? Critical Illnesses you may be susceptible to
- Things to consider before getting a critical illness insurance policy
- What you should know about Your Critical Illness Cover: The exclusions to your policy
- Save Up on Premiums: factors that affect Your Critical Illness Insurance premiums
- Dos and Don’ts When Making Critical Illness Insurance Claims
