Putting Life Insurance Policy into Trust

smiffy

My wife and I both have just taken out identical life policies. £200k as a lump sum to cover our mortgage etc, and an Income policy what will pay £18k a year for a number of years to cover our children up to age of 25.

I'm going to put the policies into trust. I think I have to put my wife down as the "Current" beneficiary and my Children down as the "Potential Future Beneficiaries". Then on her trust she will have me as the Current and the kids as the Potential.

By setting up a trust does this mean that the income will not be subject to income tax?

Also do I need to put down "additional trustees"? Or will this be managed by the insurance company?

Thanks

dunstonh

My wife and I both have just taken out identical life policies. £200k as a lump sum to cover our mortgage etc

That is an expensive and not very good way of doing it. It can also cause problems if you use a trust. For example, lender comes after the money for the mortgage but the life policy has paid out to the trustees of the children.

I'm going to put the policies into trust.

What type of trust are you using?

By setting up a trust does this mean that the income will not be subject to income tax?

There is no income tax on life assurance.

Also do I need to put down "additional trustees"? Or will this be managed by the insurance company?

You should declare additional trustees in case the main trustee dies (i.e. assumig the policy owner is also the life assured unless you wrote the policies on life of the other).

OshayAway

smiffy wrote: »

Also do I need to put down "additional trustees"? Or will this be managed by the insurance company?

you will nominate a minimum of two trustees but there is normally provision to have four. It is obviously important to chose trustees that are likely to survive you.

It's worth mentioning that there is wording you can use in the additional beneficiaries section so that you can add to those originally listed.

Did you arrange this through an adviser? It is important to get it right as a trust form is not automatically flexible by nature and once submitted can not be ammended.

smiffy

The Trust is a Non-Statutory Flexible Trust from L&G.