Level Term Life Insurance Guide Discussion

kingstreet

The more Trustees (other than you) the better. You need to ensure there will be sufficient in number who will still be around if anything happens to you.

On the issue of beneficiaries, you don't have to name them, as weighty said. A flexible/discretionary trust could direct the Trustees to settling the benefit on all your children at time of death, so there would be no need to change the beneficiaries if you have more children in the future.

Cottage_Economy

I'm reading through a guide to flexible trusts as I would like to put a joint life assurance policy within one after adding up and then forecasting what our possible IHT liability could be a few years down the line.

I feel stupid for asking this but my brain won't compute the answer from what I'm reading at the moment.

Can a settlor be a beneficiary?

Hubby and I want to set up the trust, but as we have no kids we're the ones benefiting from it.

kingstreet

If it's joint life first death, do you need to write it in trust?

Or are you more concerned about the money passing to your children if you both go at the same/similar time?

Cottage_Economy

I've forecasted the policy could take us over the IHT limits later on down the line, which would leave one of us facing a possible tax bill while grieving.

We have no children.

I'm working on the basis that it's better to have the trust and not need it, than need it and not have it.

kingstreet

You've got two nil rate bands of £325k each, that's £650k.

There are no tax implications on transfers between spouses, so who do you want to protect from the tax if you both die?

Cottage_Economy

kingstreet wrote: »

You've got two nil rate bands of £325k each, that's £650k.

There are no tax implications on transfers between spouses, so who do you want to protect from the tax if you both die?

I'm concerned the joint estate will go above £650k. Are you saying that even if our joint estate goes above £650k there's no IHT implications for the surviving spouse?

kingstreet

There's no liability between spouses, so you can pass your full estate to your husband, tax-free.

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

It's only when he then dies that the issue gets complicated. He can then leave £650k to Battersea Dogs' Home, with the estate paying Inheritance Tax of 40% on the excess value of the estate over that £650k..

Can you set out exactly what you are trying to cover? Is the concern what happens between you two, or when you are both gone and the total is being left to someone else?

Cottage_Economy

My concern first and foremost is that there is money available as fast and as painlessly as possible for my husband if I die so he can pay anything he needs to pay without worrying about where its coming from. That also applies to me if he dies, although I'm not as concerned as I'm younger, earn almost double he does and have access to help from generally comfortable parents who I know would extend a helping hand if I was widowed. I guess what I'm trying to say is any financial problems I am confident I could solve quickly and recover from, but he, being older and preparing for retirement, would find it very tough.

To a lesser extent, I would want the same thing for anyone who inherits any money he or I leave behind when we die (in our wills it goes to our parents and then to our siblings). Both his and my sibling have struggled all their lives on a relatively low income and I wouldn't want either of them burdened with any IHT issues.

I should mention my parents owned two properties in an expensive area of the country before downsizing and selling both and buying a much cheaper one to live in. Me and my sibling are the sole beneficiaries in their Will. If they end up not needing to use their savings and/or sell their house to pay for care (or indeed remarrying if one of them were widowed), there will almost certainly be an IHT issue somewhere down the line on the side of hubby and I.

My parents 'escaped' from a slum in the 60s (many of their peers didn't) and what they have today is a testament to their grit and determination and sacrifice. I want to do as best I can with any money they pass on.

dunstonh

My concern first and foremost is that there is money available as fast and as painlessly as possible for my husband if I die

joint owner, Joint life, first death would achieve that.

Both his and my sibling have struggled all their lives on a relatively low income and I wouldn't want either of them burdened with any IHT issues.

Which is a noble gesture. However, it is the executor of the estate that deals with IHT issues. Plus, putting it in trust to your spouse wont avoid IHT for that scenario. The IHT liability occurs on second death. Not first death.

Cottage_Economy

dunstonh wrote: »

Which is a noble gesture. However, it is the executor of the estate that deals with IHT issues. Plus, putting it in trust to your spouse wont avoid IHT for that scenario. The IHT liability occurs on second death. Not first death.

Ahhhh. So for the joint life assurance policy i'm about to take out a trust won't make a difference to what we're wanting to achieve so it's not needed..? The onus would be on the surviving spouse to make their financial affairs tax efficient if they didn't want their beneficiaries to incur an unnecessary IHT bill.

Did I understand that right?