Case Study 2 – example completed trust form - PruProtect

The PruProtect Discretionary Trustfor use with a PruProtect PlanAt PruProtect we try toavoid complex languageand unnecessary jargonwherever possible.However, because thisis a legal document andtrust laws are complexthe words in this formare more technicalthan other PruProtectdocuments. We’veincluded margin notesto help with completionbut if you have anyquestions let us knowand we’ll answer themas simply as possible.DisclaimerPruProtect cannot acceptresponsibility that this Trustis suitable for your individualrequirements. If you or youradviser are unsure about itssuitability, we strongly advise thatyou seek specialist legal or taxadvice.The notes in this Trust formare based on PruProtect’sunderstanding of the law andHM Revenue & Customs practiceas at January 2014.. We havemade every effort to ensurethey are accurate but accept noresponsibility for our interpretationof the law, or future changes inthe law.Important notes• This Discretionary Trust is for use withyour PruProtect Plan. It allows you to keepfor yourself the benefits under the Planthat are payable during your lifetime (suchas Serious Illness or Income ProtectionCover) and to give away other benefits,such as Life Cover, that are paid on death.• You must indicate in the Trust whether youwant to keep the sum paid on diagnosisof a terminal illness for yourself or giveit away. Once made, this choice cannotbe changed. As this choice may haveimportant tax consequences, you shoulddiscuss your requirements with youradviser. Where the Plan is a joint lifefirst death plan it is assumed that both ofyou would wish to be paid the benefit ondiagnosis of a terminal illness and so in thiscircumstance, this benefit cannot be giftedto others.• Where the Plan is a joint life second deathPlan, death benefits (including TerminalIllness benefits) are only paid on thesecond death or the second event. Thismeans that if one life assured has alreadydied or suffered a terminal illness, benefitswill be paid when the second life assureddies or suffers terminal illness. In caseswhere the second event is terminal illnessit is probably the case that both of youwould not want the survivor to receiveterminal illness benefits. This benefitcan therefore be gifted by completing theappropriate box in the trust. Benefitsbased on a life assured’s health e.g.Serious Illness benefits, will be paid on thefirst event to happen in the normal way.• To ensure that there are no adverseinheritance tax implications, if thePlan provides Serious Illness Cover(including Optional Serious Illness Coverfor Children), you need to ensure thatthe Plan includes, from outset, eitherProtected Life Cover or MinimumProtected Account at a level of 100%.Failure to do so does not affect the validityof the trust but may have adverse IHTconsequences. You should discuss yourrequirements with your adviser.• This Trust may be used either when youare applying for a new Plan or with anexisting Plan.• This Trust may be used whether the Plan isowned/applied for by one person or twopeople jointly (with death benefits payableon either the first death or second death).• This Trust can be used with Plans that areon a whole of life basis or those that expireafter a fixed term.• With a joint life plan that pays deathbenefits on the first death, you can choosefor the survivor to benefit after the firstdeath provided they survive the death by30 days. If they do not, the benefit will be heldby the Trustees for the other beneficiaries.This option is not available on joint life seconddeath Plans because benefits are not payableuntil the second event.• For a full explanation of the featuresand the legal and tax implications ofthis Trust please refer to the PruProtectDiscretionary Trust – Client Guide. ThePruProtect Discretionary Trust – AdviserGuide, gives more in-depth coverage ofthe technical issues.• This Trust is provided in draft form. Werecommend that you seek legal or taxadvice before using the Trust as, oncecreated, it cannot be revoked or altered.• If after seeking legal advice, the draft trustis to be used unaltered, you should followthe completion instructions in the marginof the document.pruprotect.co.uk

• We strongly recommend that you appointadditional trustees to act with you from theoutset. A separate deed of appointmentis available from PruProtect for thispurpose. If you are domiciled in Scotlandit is absolutely essential that at least oneadditional trustee is appointed when theTrust is established.• You should not use this Trust in a businessprotection arrangement.Key trust provisions1. The Retained Fund is comprised of thebenefits under the Plan that you want tokeep for yourself. They will be held on abare trust for you.2. The Gifted Fund is comprised of thebenefits of the Plan that you give awayand that will be held by the Trustees ondiscretionary trust for the Beneficiaries.The Appointor chooses which of theBeneficiaries referred to in the Trustshould receive any payments from theGifted Fund. The Appointor is you, duringyour lifetime, and then the Trustees.Please sign this page as confirmationthat you have read and understoodthese notes.SignedHarry and Julie to sign

Next steps?If you decide to make your PruProtect Plan subject to the PruProtectDiscretionary Trust, it is important that you follow the process below tomake sure all documents are correctly completed and submitted:You/your adviser completes the Discretionary Trustform. This Trust form must be dated on or after the dateof the Plan application.Consider appointing at outset at least one additionaltrustee to act with you and providing the Trusteeswith a Letter of Wishes to guide them. See PruProtect‘Deed of Appointment of Additional Trustees’ and‘Letter of Wishes’.Post the original Trust form (along with the Planapplication if placing in Trust from outset) and the‘Deed of Appointment of Additional Trustees’ (ifappointed at outset) to PruProtect, Stirling, FK9 4UE.We will return to you the original Trust form(s) byspecial delivery once processed.We will confirm to you by letter when our Trust recordshave been successfully updated.You should then:1. Provide all additional Trustees with copies of theTrust form(s).2. Provide the first additional Trustee with theoriginal Letter of Wishes (if produced) and copies toany other Trustees.3. Make the Trustees aware of the place ofsafe-keeping for the original Trust form for ease atpoint of claim.3

Insert here the date this Trustis signed and your name andaddress. Where there are twoapplicants for the Plan or twoPlanholders (in the case of existingPlans) both names and addressesneed to be inserted.This person(s) is known as theSettlor.Part A Request and DeclarationThis Declaration of Trust is made thein the yearInsert date of Plan applicationbyHarry – full nameNameofHarry – full addressAddressday ofbyNameofAddressJulie – full nameJulie – full address(called “the Settlor”. Where two persons are named above, they will both be the Settlor)As follows:(I) Where a new Plan is appliedforThe Settlor refers to the application toThe Prudential Assurance Company (“theCompany”) for the PruProtect Plan describedin Part B below and now requests and directsthat the Plan be issued by the Company insuch manner as to constitute the Settlor asthe Trustee (as defined below) to hold thePlan on the trusts and subject to the powersand provisions of this Trust.or (II) Where a Plan is alreadyin existenceThe Settlor as the legal and beneficial ownerof the PruProtect Plan described in Part Bbelow and effected with The PrudentialAssurance Company (“the Company”) nowdeclares that from the date of this Declarationthe Settlor holds the Plan as the Trustee (asdefined below) on trusts and subject to thepowers and provisions of this Trust.This Trust can be used with a newor existing Plan. In the case of aNEW Plan, please complete thefirst field in Part B(1). If it relates toan EXISTING Plan, please completethe second field in Part B(1).Part B Plan subject to Trust(1) Date of application (if Part A(I) above applies)or Plan Number(s) (if Part A(II) above applies)Insert date of Plan applicationInsert the name(s) under the Plan.(2) Life(Lives) AssuredHarry’s full nameJulie’s full name4

If the Plan is a joint life first deathPlan and if you wish the survivingSettlor to benefit from deathbenefits if they survive for 30 daysfrom the first death, both of youmust initial this Box. This option isnot available for single life Plans orjoint life second death Plans.(3) For joint life first death PlansReversion to surviving SettlorHarry to initialJulie to initialYou must initial either field (a)or field (b) in this Part B(4), ie. youmust not leave both fields in thisPart blank or initial both fields.(4) Entitlement to benefits on diagnosis of Terminal IllnessIf you wish to keep the paymentmade on diagnosis of TerminalIllness for yourself, you (bothof you) must initial field (a). Youboth must choose this option ifyou have a joint life Plan that paysdeath benefits on the first deathand you have elected for the“Reversion to surviving Settlor”option in paragraph (3) above.(a) Retained FundHarry to initialJulie to initialIf you wish to give the paymentmade on diagnosis of TerminalIllness to your Beneficiaries, you(both of you) must initial field (b).Do not initial this field if you haveinitialled field (3) above.(b) Gifted FundIn cases of joint life second deathPlans it is likely that you wouldwish to gift terminal illness benefitspayable where terminal illness is thesecond event to occur. If this is thecase please initial paragraph (b).Part C DefinitionsIn this Trust, in addition to the terms definedabove, the following expressions shall havethe following meanings and, unless thecontext does not permit the singular shallinclude the plural and the masculine shallinclude the feminine and vice versa.(1) “Appointor” means the Settlor duringhis or her lifetime (and where twopersons are the Settlor both of themduring their joint lifetime and then thesurvivor) and the Trustees following theSettlor’s (or the second Settlor’s) death.(2) “Beneficiaries” means:(a) any Spouse, former Spouse, Widowor Widower of the Settlor (providedthey are not also the Settlor).(b) the Children and Remoter Issue of theSettlor whenever born.(c) any Spouse, former Spouse, Widow orWidower of any such Child or RemoterIssue.(d) any brother or sister of the Settlor andtheir issue.(e) any person other than the Settlor (eitherSettlor for joint Plans) who shall uponthe death of the Settlor (either Settlor forjoint Plans) become beneficially entitledto the whole or any part of the estate ofthe deceased Settlor) whether by virtueof any will or codicil or under the rules ofintestacy or by virtue of survivorship orotherwise.5

You should include in (g) the nameof anybody else you would wish tobe a Beneficiary under the Trust.This should not be you.You must insert here the individualname(s) of the person(s) you wishto benefit at the end of the 125year Trust Period if no appointmenthas been made by the Trustees.If more than one person is namedstate the percentage shares inwhich they are to benefit. At leastone person must be specifiedhere. The shares must add upto 100%.(f) any person (other than the Settlor(s) thathave been nominated to the Trustees inwriting by the Settlor(s) as a Beneficiary.For joint Plans, this nomination must bemade by both Settlors jointly during theirjoint lives and afterwards by the survivor.(3) “Child”, “Children” and “Issue”includes any illegitimate step adoptedor legitimated (whether adopted orlegitimated before or after the datehereof) child, children or issue.Name(s) of Default BeneficiariesDexter – full nameEdward – full nameAnna – full nameand if none are named in the boxes abovethen the child or children of the Settlor(s)alive at the end of the Trust Period andif more than one in equal shares and ifnone alive the estate of the last one to die.Provided that if the Settlor (either of them)has no children and no Default Beneficiaryis named above then the Default Beneficiarywill be the individual or charity who is entitledto the largest part (or the whole) of the estateof the Settlor (or the surviving Settlor) underthe Settlor’s will or, if there is no valid will,under intestacy, and if there are more thanone individuals or charities entitled equallythen for such individuals or charities asappropriate(5) “Gifted Fund” means the Trust Fund tothe exclusion of the Retained Fund.(6) “Life Assured” means the person(s)identified as such in Part B(2) above.(7) “Plan” means the PruProtect contractof life assurance the number of whichor the date of application for which (asappropriate) is specified in Part B(1)above.(8) “Retained Fund” means any rights toany of the following benefits that areprovided under the Plan, namely:- Serious Illness Cover (including anybenefits which become payable at thesame time as the Serious Illness Cover),- Serious Illness Cover for Children,- Disability Cover,- Income Protection Cover,- all benefits under the VitalityProgramme,- if paragraph (a) in Part B(4) above has(g)(h) the Default Beneficiaries (as defined inparagraph (4) below)(4) “Default Beneficiaries” means theone or more persons named in theboxes belowShare (if more than one)33.33 %33.33 %33.33 %been initialled any payments made ondiagnosis of Terminal Illness as definedin the definitions section of the PlanProvisions,- all other benefits which are payableunder the Plan during the lifetime ofthe Life Assured or either of them byreason of the Life Assured suffering anillness or condition as specified in thePlan,- any property from time to timerepresenting the same and for theavoidance of doubt if neither paragraph(a) nor (b) in part B (4) has beeninitialled, the Terminal Illness Benefitwill not be a part of the RetainedFund except where the Settlors haveindicated by initialling the box in Part B(3) that the Reversion to the SurvivingSettlor provision shall apply in whichcase the TIB will be a part of theRetained Fund.(9) “Spouse” and “Widow/Widower”includes any civil partner or survivingcivil partner registered under the CivilPartnership Act 2004.(10) “Trust Fund” means the Plan, the fullbenefit thereof, any assets at anytime added to this Trust by wayof further settlement, capital accretion,accumulation of income or otherwiseand all assets from time to timerepresenting the same.(11) “Trust Period” means the period of 125years from the date of this Trust deed.(12) “Trustees” means the trustee or trusteesfor the time being of this Trust.6

Part D Principal Trust Terms – The Retained FundThe Trustees shall hold the Retained Fundand its income upon trust for the absoluteand indefeasible benefit of the Settlor or, ifthe Settlor is two persons, for the benefit ofthat Settlor in respect of whose illnessor disability the relevant benefit under thePlan is payable, provided that any benefit inrespect of Serious Illness Cover for Children(as defined in the Plan) shall be held for bothSettlors jointly.Part E Principal Trust Terms – The Gifted Fund1. During the Trust Period the Appointorshall have power by deed(s) revocable(whether by the person(s) makingthe deed or some other person(s)) orirrevocable to appoint the whole orany part(s) of the Gifted Fund and itsincome for any one or more of theBeneficiaries in such one or more sharesand for such interests and subject to suchtrusts powers and provisions (includingprotective trusts, discretionary trusts orpowers operative or exercisable at thediscretion of the Appointor or any otherpersons) as the Appointor shall in theirabsolute discretion think fit.Provided always that no suchappointment shall infringe the ruleagainst perpetuities (where this isrelevant) or affect the entitlement of anyperson to any payment made or assettransferred to him or her.Provided also that where theTrusteesare the Appointor no appointment shallbe made in favour of a Beneficiary whois one of the Trustees unless there is atleast one other Trustee who does notbenefit directly or indirectly from theappointment.2. Subject to paragraph 1 of this Part E:(a) The Trustees may accumulate thewhole or part of the income of theGifted Fund during the Trust Periodby adding such income to the GiftedFund.(b) The Trustees shall pay or apply theremainder of the income of the GiftedFund to or for the benefit of such ofthe Beneficiaries as the Trustees thinkfit during the Trust Period.3. To the extent that any part of the GiftedFund and its income shall not have beenappointed or otherwise disposed of bythe Trustees during the Trust Period, theGifted Fund shall be held for the absolutebenefit of the Default Beneficiaries, and ifmore than one in the shares specified andif no shares are specified in equal shares.4. During the Trust Perioda) the Trustees shall have power to paytransfer or apply the whole or anypart(s) of the capital of the GiftedFund for or towards the advancementor maintenance, education or benefitof any Beneficiary entitled to suchwhole or part.(b) the Trustees shall have power tolend with or without security toany Beneficiary the whole or anypart of the Gifted Fund upon suchconditions as to interest (if any),repayment and generally upon suchterms as the Trustees in their absolutediscretion think fit Provided Alwaysthat any such loan must be repayablebefore the end of the Trust Period.5. Notwithstanding the provisions ofParagraphs 1, 2, 3 and 4 of this Part E,where two persons are the Settlor andthe box in Part B(3) is initialled by bothof them then if the Life Cover becomespayable under the Plan the Gifted Fundshall be held for the absolute benefit ofthe surviving (or the other) Settlor if he orshe survives the first to die for a period of30 days.6. None of the Trusts powers or provisionsshall operate or be exercised to allow anypart of the Gifted Fund or its income to bepaid, transferred or applied, to or for thebenefit of the Settlor(s) except where bothSettlors have initialled the box in Part B(3)in which case the Settlors’ rights underthis Trust are limited to those specified inparagraph 5 of this Part E above.7

Part F Administrative Powers of the TrusteesIn addition to any powers conferred uponthem by law the Trustees shall have thefollowing powers:1. All the powers of an absolute owner ofthe Plan (or any life assurance policyforming part of the Trust Fund) includingthe power to exercise any option or to sellor realise the Plan or any such policy orto convert the same to any other form ofassurance Provided that if the Settlor(s)is alive then the right to exercise anyoptions under the Plan which can reduceor increase the level of benefits payableunder the Plan will vest in the Settlor oreither or both of them as appropriate. Forthe avoidance of doubt it is confirmedthat any additional cover arising as aresult of the Settlor exercising their rightsunder the Plan will form part of the TrustFund.2. Power to borrow money on the securityof the Plan (or any life assurance policy)in order to pay any overdue or futurepremium or any other sum necessary formaintaining the Plan or policy in force.3. Power to mortgage, surrender orotherwise deal with the said Plan (or anylife assurance policy) in such manneras the Trustees shall in their absolutediscretion think appropriate.4. Power to invest or apply the Trust Fundfor acquisition of either income ornon-income producing assets includingother life assurance policies or suchstocks, funds, shares, securities or otherinvestments or property, of whatevernature and wherever situated, andwhether involving liabilities or not, withor without security as the Trustees in theirabsolute discretion shall think fit with theintention that the Trustees shall have thesame powers as absolute owners who arebeneficially entitled.5. Power to pay or transfer any capital orincome to be paid, transferred to, orapplied for the benefit of a Beneficiarywho is under a legal disability, to anyparent or guardian of that Beneficiary orto such other person on behalf of suchBeneficiary, as the Trustees shall think fitand the receipt of that person shall be acomplete discharge to the Trustees whoshall be under no obligation to see to theproper application of the funds.Part G Appointment and Dismissal of Trustees1. The power to appoint new or additionaltrustees by deed will vest in theAppointor and where necessary theTrustees will grant any necessarydocumentation to complete suchappointment.2. The Settlor during his or her lifetimewill have power by deed to dismiss anyTrustee (and where two persons are theSettlor this power shall be exercisedby them jointly during their lives andthereafter by the survivor) providedat least two Trustees remain after suchdismissal at least one of whom is not theSettlor.Part H Remuneration and Liability of Trustees1. Any Trustee (other than the Settlor or aSpouse of the Settlor) who is a solicitor orother person engaged in any professionor business shall be entitled to chargeand to be paid all usual professional orother charges for business done by himor her or his or her firm in connectionwith the Trust whether in the ordinarycourse of his or her profession orbusiness or not.2. No Trustee who is an individual shall beliable for any loss to the Trust Fund or theincome arising from it by reason eitherof (a) any investment made in good faithby him or her or any other Trustee; or (b)any mistake or omission made in goodfaith by him or her or any other Trusteeexcept in the case of negligence by a paidTrustee; or (c) the negligence or fraud ofany delegate or agent employed in goodfaith by him or her or any other Trusteealthough the delegation to or employmentof such agent was not strictly necessary orexpedient; or (d) any other matter exceptindividual fraud on the part of the Trusteewhom it is sought to make liable or, in thecase of a paid Trustee, negligence.8

Part I The Law of the TrustThis trust shall be irrevocable and shall be governed by and construed in accordance withthe law of England.Part J SignaturesIN WITNESS whereof the Settlor executed this deed the day and year stated above.SIGNED AS A DEED AND DELIVERED by the said Settlor:The Settlor (or in cases of jointSettlors, the first Settlor) must signhere. His/her signature shouldbe witnessed.A witness must be over 18 and anindependent person.Harry – full nameName of SettlorIn the presence of:Name and address of WitnessHarry to signSignature of SettlorSignature of WitnessSignature of WitnessName and address of WitnessThe second Settlor (where a jointPlan) must sign here. His/hersignature should be witnessed.Julie – full nameName of second SettlorIn the presence of:Julie to signSignature of second SettlorName and address of WitnessSignature of WitnessSignature of WitnessName and address of Witnesspruprotect.co.ukPruProtect is a trading name of Prudential Health Services Limited. Registered number 05933141. Registered in England and Wales. Registered office at Laurence Pountney Hill, LondonEC4R 0HH. Prudential Health Services Limited is authorised and regulated by the Financial Conduct Authority.PRUPM11110 01/2014