Level Term Life Insurance Guide Discussion

SHEILA54

The house is all I have and I don't want to gift some of it away in case the families fall apart, forcing me to sell the property.

kingstreet

What is the total value of your estate?

Inheritance tax only applies to the excess over £325,000. Tell us what the excess will be and then you can look at planning from there.

Making gifts helps reduce the estate.

Life assurance can mitigate the tax payable when it's due.

SHEILA54

The house is worth about £475,OOO, only a semi but I live in the south east. That is why I reckon that I need to cover £60000 for inheritance tax purposes.

My family are at loggerheads at the moment so I intend to keep the house in my name in case things get difficult.

Thanks

kingstreet

You have no other estate, other than the property?

Are you married?

SHEILA54

No, I am divorced and I have no savings, jewellery etc as all of my money goes on living, helping out family and maintaining the property. There will be a bit spare when I finish paying the mortgage in 6 years time and I have wondered whether to keep the mortgage protection going and reconsider then but my health could be worse and I will be 68.

kingstreet

If you already have some form of life cover, it may be an idea to ask the insurer to provide the forms to write it in trust now. As it stands, the mortgage debt and the life cover balance each other out.

For example, £100k mortgage debt reduces your estate by that amount, but £100k life cover sticks the same amount back in your estate.

If the policy is written in trust, the £100k debt goes out, and the trust takes the life cover out, so there's no equivalent going back in the estate.

The life cover can then be used by the beneficiaries to repay the mortgage, reducing the inheritance tax liability at the same time. You then have a lower amount to mitigate with the whole life, at least until the mortgage protection policy ends.

SHEILA54

As I understand it, the decreasing term policy is just to pay off the surplus left on the mortgage over the next 6 years, should I die.

I have now had an urgent phone call saying that the PRU are increasing their life policy Pruprotect premiums by 50% from tomorrow and I must act now. It all seems a bit sudden as I thought that I had a bit longer before the EU directive comes in.

Is this true please?

kingstreet

A plan should be in force by 21/12/12 to qualify for the old rates. One of the others may know exactly what Pru Protect's transitional arrangements are.

As I understand it, the decreasing term policy is just to pay off the surplus left on the mortgage over the next 6 years, should I die.

That's correct. By making a payment into your estate. Writing it in trust will avoid the estate and leave the debt on the estate, reducing the inheritance tax liability. The trust beneficiaries settle the mortgage, rather than the estate.

dunstonh

A plan should be in force by 21/12/12 to qualify for the old rates. One of the others may know exactly what Pru Protect's transitional arrangements are.

I dont know what Pru are doing now. Ever since their last debacle when they increased rates and included pipeline cases, we have tended to avoid them. Not that they ever seem to come up as one to recommend anyway.

kingstreet

dunstonh wrote: »

I dont know what Pru are doing now. Ever since their last debacle when they increased rates and included pipeline cases, we have tended to avoid them. Not that they ever seem to come up as one to recommend anyway.

Me neither. I was just setting up on my own in June 2003 and had £26k worth of business in the pipeline with them when they pulled the plug.

There'll be snowball fights in hell before they'll get anything from me...