Life Assurance Policy and Tennants in Common

s_glover

My partner and I (not married) are buying our first home. I am putting in all of the deposit and therefore we are going to be tennants in common.

We have taken out life assurance policies along with the (joint) mortgage to cover the full mortgage cost however I am uncertain how this will pay out with regards to being tennants in common.

If one of us dies, will the life insurance automatically pay off the complete mortgage or only half of the mortgage?

dunstonh

If one of us dies, will the life insurance automatically pay off the complete mortgage or only half of the mortgage?

if you set the life assurance up as joint owner, joint life, first death then the surviving policy owner will be paid the money to do with as they wish.

magpiecottage

dunstonh wrote: »

if you set the life assurance up as joint owner, joint life, first death then the surviving policy owner will be paid the money to do with as they wish.

If, on the other hand, you have single life policies, they will pay out into the estate of the deceased. It will then take months to sort out probate and if no will has been made is likely to end up going to relations in accordance with the Laws of Intestacy. (There is no such thing as a "Common Law" spouse).

Even with a Will, the survivor will have to make repayments whilst probate is arranged.

So, if they are single life policies and the lender does not take a legal assignment (and I have not known them to for over 10 years) write them in trust and appoint each other as additional trustees. This means any claim will be paid outside of the estate and probate need not be waited for.

It will also be unaffected by whether or not a will is made. However, you should still make them.

s_glover

Many thanks for your comments. THe life policies are individual so I will enquire about getting these written in trust to ensure that they pay out without having to go through probate.

We will also be writing wills as well.

Just to clarify, the policies we have cover each of us for the amount of the mortgage (decreasing term) so even though the property will be divided say 60:40, will either policy pay out the full mortgage remaining to the other person?

TIA

kingstreet

s_glover wrote: »

Just to clarify, the policies we have cover each of us for the amount of the mortgage (decreasing term) so even though the property will be divided say 60:40, will either policy pay out the full mortgage remaining to the other person?

If you've taken out cover for the whole mortgage, there should be enough to repay the outstanding mortgage should either of you die.

If both of you die, then double the amount needed will be paid to the respective trusts (once set up) so don't forget you'll need named, or a class of beneficiary, beyond just you two.

s_glover

Many thanks for your responses. We will contact the company providing our insurance policies and ask if we can have them written in trust.

I assume from the above comment you can name one person to benefit and then add a second person to benefit should the first person die as well as the policyholder, is this correct?

kingstreet

You take out a life policy. You are the settlor when it comes to writing a trust.

You'll need several trustees, not including yourself of course, as you'll be departed. The trustees are simply responsible for receiving the benefit and paying it to those named as the beneficiar(y/ies). Pick relatives, perhaps siblings and close friends.

You can either pick named beneficiaries, such as Mr XXX or you can have classes of beneficiary. For example, the primary beneficiary could be "my spouse" with a contingent beneficiary class of "my children" just in case your spouse pre-deceases you. Obviously you aren't going to be a beneficiary.

Most insurers have bare trusts, where you add the names of beneficiaries, or discretionary trusts where you use the beneficiary classes. You need to ask the insurer for the trust form you think will suit you best.

You'll then have to get together with the potential trustees to explain what you want them to do and to have them sign the form.

dunstonh

Taking out single life policies to cover a joint debt that only needs to be repaid once is a waste of money. If it was an advice case, then this could be classed as a mis-sale. So, why have you done it this way?

s_glover

dunstonh wrote: »

Taking out single life policies to cover a joint debt that only needs to be repaid once is a waste of money. If it was an advice case, then this could be classed as a mis-sale. So, why have you done it this way?

We have a joint mortgage and took out separate policies with the bank also as these were not more expensive than elsewhere. We were told that indiviual policies were always issued - should we be asking for these to be cancelle dand take out a joint policy?

kingstreet

Post your dates of birth, smoker statuses, mortgage amount and term and I'm sure one of us can tell you what a realistic premium would have been for both two singles, or a joint life plan. A joint life plan would avoid the aggro of writing two trusts now.

s_glover

kingstreet wrote: »

Post your dates of birth, smoker statuses, mortgage amount and term and I'm sure one of us can tell you what a realistic premium would have been for both two singles, or a joint life plan. A joint life plan would avoid the aggro of writing two trusts now.

Hi,

The dates of birth are 1/83 and 07/82, non smokers, mortgage amount £184,875 and 30 year term.

TIA