Which type of trust is most appropriate for a combined policy of critical illness cover and life assurance?

The most appropriate type of trust for a combined policy of critical illness cover and life assurance is the split trust. This type of trust is designed to handle both aspects of the combined policy effectively. In a split trust, the benefits from critical illness cover can be paid out immediately to the policyholder or beneficiaries upon diagnosis of a critical illness, allowing access to funds for medical expenses or lifestyle adjustments.

At the same time, the life assurance component can be set up to pass the proceeds upon death to the selected beneficiaries, ensuring that the life cover benefits are managed according to the wishes of the policyholder. This separation of benefits provides flexibility and addresses different needs in a way that other trust types may not.

Other trust types, such as discretionary trusts, interest in possession trusts, and absolute trusts, serve specific purposes that may not align as well with the unique requirements of a combined critical illness and life assurance policy. Discretionary trusts allow trustees to decide how benefits are distributed, which could delay access for immediate needs that arise from a critical illness. Interest in possession trusts grant a beneficiary the right to income generated from the trust but may not adequately cover the critical illness benefits needing immediate release. Absolute trusts provide beneficiaries with outright ownership of the trust assets, which might