"A Trust under a life insurance policy is created by the policyholder holding the policy". Explain the statement and its implications and advantages.

"A Trust under a life insurance policy is created by the policyholder holding the policy" The concept of Trusts in a Life policy is necessitated by the applicability of estate duty on transfer/inheritance of benefits under a life insurance policy, including annuities. While with the abolition of estate duty in India, the concept of Trusts may no longer be preferred, it is beneficial to understand the subject in detail. The principal advantages to putting a life insurance policy into trust are as follows: Trusts can help sidestep inheritance tax Life insurance policies are such an asset, and putting a policy into a trust can affect what happens to the payout from a policy in the event of your death. In industry jargon, putting a life insurance policy into a trust is known as "writing life insurance in trust" or a policy is "written in trust". By writing a life-insurance policy in trust, the proceeds from the policy can be paid directly to the beneficiaries rather than to your legal estate, and will therefore not be taken into account when inheritance tax is calculated. This means the value of your estate may not move above the threshold, depending on your circumstances. You don't need probate to be granted in order for the policy to pay out Writing a policy in trust also means payment to your beneficiaries will probably be quicker, as the money will not go through probate. This is a legal process which confirms an executor's authority to deal with your possessions. So, for example, if you leave everything to your spouse in your will, then your spouse will have to get probate granted before they can distribute your money, property and so on. This process can take a long time, even when there is a will. In cases of intestacy (where there is no will), it can drag on for a lot longer. However, if the life insurance policy is put into trust, then it can pay out before probate is granted, as the insurance provider will just require a death certificate before paying out. You could get greater control over your policy Writing life insurance in trust allows you to specify how you want the proceeds to be paid out. For example, trustees can be appointed to oversee money for the benefit of children under 18. In addition, setting up a trust means that the payout will go to the people you intend it to. It does not involve any extra cost The insurance provider should be able to provide with this option for free when taking out the policy. Some existing life policies can also be transferred into trust