Should A Key Person Insurance Policy Be Written In Trust?

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?

Question asked by Nina Cuesta
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Answered by Andrew Jenkinson

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 its future profits and success of the company. As such, 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 generally be set up in trust.

However, it’s worth noting that there will likely be some tax implications on a claim from the money going back into the business, as it will typically be treated as a kind of trading receipt.

keyman insurance
 
employee benefits
 
critical illness
 
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
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