Advice for a clueless idiot on life assurance

HelenHarte69

Hi all

Apologies in advance for such basic questions.

I am a single parent with a 15 year old son. I have no assets to speak of, don't have a mortgage etc. As far as I am aware I am in good health and not expecting to peg it anytime soon (although I do smoke).

But, because I have absolutely no family (and therefore neither does my son) I am really, really worried about what would happen to him if I died. I can't bear the thought of him being lost and alone with no one to turn to ...... and I can't believe that it's only just occurred to me to take out life assurance so that he'll have something to set himself up with if the worst happened.

I neither want or need to make him rich, and given that I have very, very little disposable income I need to keep my premiums low.

A payout of £60,000 (without critical cover and for 10 years) would cost me about £8pm from LV. I think this would be a reasonable sum for him. Does anyone have an immediate thoughts about this?

I am aware that I need to put it in trust for him to avoid inheritance tax. But when I filled out the application this was not an option, so how do I organise that? At what stage do I tell the insurers this?

Also, what happens if I leave debts behind? Will they be paid out of this money if it's in trust for him? I don't really have any to speak of right now, but who knows, right?

Those are my first questions. Any advice very gratefully received.

Thanks

celiacelia226

Sorry, can not recommendations to you, because I do not know how to deal with it also

System

You do seem to have left it a bit late to be considering this - he will be of full age in 3 years time and can do what he likes.
More important than the money is who will be/would have been his guardian? Most people I know have set up arrangements with trusted friends or relatives, often on a mutual basis, so that orphaned children of any age would have secured foster parents or guardians they already know. In those circumstances it is the guardians who would need the financial provision to cover their costs, not the child.

HelenHarte69

Actually, Clifford, I am much more concerned about providing him with something in the event that he was left alone as a young adult.

If I died tomorrow he'd, at the very least, be taken into care. If I died when he was 18, he'd be completely alone. I was in the same boat myself at aged 18/19 and ended up homeless....I do not wish to risk that happening to him.

We are not "most people" - I do not have anyone who could act as guardian, so cannot really concern myself with that.

I take it that you can't actually answer the specific questions I have asked? Hopefully someone else might be able to. Comments about what I ought to do, or what others would do, are not helpful from someone who has absolutely no idea of the very specific concerns and difficulties we have.

Think I might just go elsewhere for my advice, actually.

ACG

Its good that your considering life insurance for your sons benefit.
2 Important things to consider based on your post (1 of which you have already mentioned).

Trusts - Putting the policy in trust effectively takes the money out of your estate and pays it to your son...so any debts you have will not be deducted from this money.

Waiver of premium (WoP) - With you saying your a single parent, what this does is pays your premium if your off work sick for (usually) 6 months or longer. It costs a matter of pence so its worth thinking about.

As for how to put the policy in trust, call LV or whoever you use and ask them for a trust form - the most common is a discretionary trust form. Complete this, get 2 trustees to sign it and then send it back.

If you have any problems feel free to ask away on here, but you can also speak to a mortgage or financial advisor who can help.

One other thing to think about as you mention your relying on your sole income is income protection/phi - this will also be on the LV website if you wanted to have a read up on it.

EDIT:
Just seen your last post. If you do not have 2 people to act as trustees, it could be worth using an actual advisor and/or a solicitor. They MAY charge for the service... although an advisor may be willing to do it for free based on the fact they would have earnt commission out of it.

Quentin

HelenHarte69 wrote: »

Any advice very gratefully received....

Beware the pms you may get from the rogue brokers who stalk MSE looking for business!

weighty1_2

@ACG, I'd be amazed if an advisor would be willing to act as a trustee on a clients policy, irrespective of whether they earned any money from it or not.

Since trustee have certain legal obligations in regards to their capacity I think it would be foolhardy to do this for nothing, or potentially at all, especially on the back of the commission earned from a £10/month policy!

Some solicitors will act as trustees and will not charge for their services except in the event of a claim at which point they will either charge a fixed fee or a % of the trust value.

ACG

I agree.

However with the son being 15 there isnt a lot that can be done with regards to investing it. It would only be 2-3 years max before they would be entitled to it anyway.

I should stress that its something i would be reluctant to do and i suspect most would for a number of reasons, but if there is nobody else then its an option that may be available.

System

HelenHarte69 wrote: »

Think I might just go elsewhere for my advice, actually.

Please do. There are lots of aspects to a situation like this, and I was attempting some advice regarding one of them, which I have experience of.

In your position I would be more concerned about the prospect of him being taken into care, than in giving him £60,000. Actually I think giving a young person a lot of money is the worst thing you could do, but that's just my opinion, not advice.

kingstreet

In these circumstances, I'd consider a family income benefit plan which pays a regular income, rather than a lump sum. If you feel your son is likely to enter higher education, you might consider writing the plan with a benefit payable until he's perhaps twenty-five.

Write the plan in trust, leaving mature adults to control the payments to him until he reaches majority. The money is paid outside your estate, so it's protected against any creditors you may have and he won't have to go through the hassle of administration/probate to get it.

Try to work out how much he'd need to live on if anything happened to you. An FIB for say, 10 years, with a benefit of £15,000 a year, would cost as little as £6.26 per month for a 35 year old female smoker.

An independent financial adviser would be the best person to discuss your protection needs and about writing the plan in trust.