Life assurance trust form - confused

josiejump_2

Hi - I have recently taken out two fixed term (21 yrs) single life insurance policies for myself and my partner (both early 40's & unmarried) for £165,000 - which covers our mortgage as it currently stands. These replace a previous joint policy taken out when we were both smokers! We have one child, aged 7.

The broker has advised to put this cover in Trust but I don't understand the jargon or the form. Do we both need to complete a form separately (i.e. in each case, as the 'Settlor')? The form allows naming of up to 4 'Trustees' and 4 'Beneficiaries' but I don't understand who these should be. Should my partner be named as 'Trustee' on my form and vice versa? Are we also one another's 'Beneficiaries'? If so, should the 'split' be 100%? But what about our child?

Obviously, if I die my priority is that my partner has sufficient funds to pay off the mortgage, and vice versa. If there is anything left over from the life insurance money, I would expect this to be used for bringing up our child. If we both die, then we would want any monies outstanding after the mortgage was repaid to go to our son (in trust until he is 18 if we both died before that time).

Please can someone advise me how to complete the form? I don't know if it matters but neither of us has made a Will, which I realise is very remiss given that we have not married, but that's next on my 'sorting out the finances' list of things to do! Should the 'Trustee(s)' named here be the same as whoever we would appoint as 'Executors' of our wills? (If that doesn't make sense, it's because I have no idea about all this stuff!).

Any advice gratefully received.

dunstonh

************NOTE : answered on the basis of no child********* Posts 3 and 4 answer on the basis of there being a child. - bits on single plans still apply but where the money goes was based on no child.

I have recently taken out two fixed term (21 yrs) single life insurance policies for myself and my partner (both early 40's & unmarried) for £165,000 - which covers our mortgage as it currently stands. These replace a previous joint policy taken out when we were both smokers! We have one child, aged 7.

Why havent you taken out a joint life, first death policy? Surely that is more efficient and covers the need better. I read recently in a compliance report that the sale of two single plans is now being frowned upon by the FOS in complaints and whilst they will allow it with correct disclosure warnings (i.e. how much more it costs compared to a joint plan), it is has to be for a good reason.

The broker has advised to put this cover in Trust but I don't understand the jargon or the form. Do we both need to complete a form separately (i.e. in each case, as the 'Settlor')? The form allows naming of up to 4 'Trustees' and 4 'Beneficiaries' but I don't understand who these should be. Should my partner be named as 'Trustee' on my form and vice versa? Are we also one another's 'Beneficiaries'? If so, should the 'split' be 100%? But what about our child?

If you have two plans then you need two trusts.

Please can someone advise me how to complete the form?

I would junk the lot and start again as you are making a bit of a pigs ear of it. If its an advised case then you should consider a different adviser.

Take out a joint life, joint owner, first death plan for the mortgage and then a joint life, joint owner, first death plan for the family protection covering that need assuming your individual needs are similar. If they are not similar and you need to have single life plans because fo the difference in the needs covered then you could do life of another (single life, single owner) or you could use trusts.

I don't know if it matters but neither of us has made a Will, which I realise is very remiss given that we have not married

You do need it otherwise you could find your parents end up with the money on your death, not your partner.

magpiecottage

Selden wrote: »

I don't think this is right - surely under s46 of the Administration of Estates Act 1925 the real and personal property of the deceased unmarried parent would be held on the statutory trusts for the child?

My understanding too.

Selden wrote: »

Regardless of this, I agree that wills should be made.

Me too

Selden wrote: »

Nothing to do with the OP's query, but which insurers do you know who offer life-of-another on an unmarried partner? I know some are concerned about the lack of a recognised insurable interest...

The mortgage is relatively easy to demonstrate because of the joint and several liability. The need to provide for the child is possible but not so easy.

Either way, if single life policies are taken out, an own life with a power of appointment trust is probably preferable partly because the policy can then be re-used if they subsequently split up and also because it will keep the policies out of the estate if both died, say in an accident* and not only avoid inheritance tax but also the need to wait for probate.

*If you've seen the Financial Ombudsman Service thread, I have had enough of arguing what does and doesn't constitute an accidental death!

dunstonh

I don't think this is right - surely under s46 of the Administration of Estates Act 1925 the real and personal property of the deceased unmarried parent would be held on the statutory trusts for the child?

You are right. I was mixing this thread up with another that is in progress at the moment. That one doesnt have a child and was doing the same thing with single policies rather than joint. I was answering as if no child. ( this thread: https://forums.moneysavingexpert.com/discussion/2635667 )

Sorry for the confusion. its unusual to get two threads on a similar subject on the same day and obviously my speed reading is not up to par this evening.

josiejump_2

Thanks for your responses. Still confused though! Dunstonh - are you saying that in our case (WITH a child) we are better with two single policies than with a joint life, first death policy? In which case, I understand we should each complete a trust form?

I'm still unsure who we put as 'Trustees' and who as 'Beneficiaries' (and what the '% split' should be in the latter case). Basically, in the event of one of our deaths, we would want 100% to go to the other partner. But in the event of us both dying, 100% to our child - to pay off the house and provide extra.

I take on board the strong recommendations to get wills sorted, by the way!

dunstonh

are you saying that in our case (WITH a child) we are better with two single policies than with a joint life, first death policy?

No. If you have a debt that only needs paying off on first death then there is no reason to take out two single policies. You have two needs. 1 - clearing the mortgage 2 - family protection. Both will have different terms and requirements. So, doing one (each) policy to cover both needs is usually not the right way to do it. You would normally do a joint life plan for the mortgage and then another plan for the family protection. If your financial needs on the family plan are quite different (i.e. one of you is a high earner and the other isnt) then having sole plans can make sense.