which life assurance is for me?

BAK68

Help me please, I have 2 properties both on interest only mortgages, which are both rented out (one with negative equity) - what would happen if I die? as I have 2 teenage children?

Do these properties count as my estate?
If I take out life insurance and die before the term, will the money go towards paying the mortgages or will it be given to my children?

ACG

Life Insurance is totally seperate to the mortgage, even though you may take it out to cover the mortgage.

The life insurance would pay out and it would either go to your estate or your beneficiary if you put it in trust. The beneficiary can then do what they like with the money - pay the mortgage off, spend it on women and cars or education or even a house of their own.

If the properties were to be sold for less than the outstanding balance, then any shortfall would come from your estate (which is why you should look at placing the life policy in trust).

BAK68

Thanks for your reply it has really helped, I will be putting the life insurance in a trust.

I am a bit confused regarding my estate? who decides what to do with my estate? if the properties are sold for more who gets the money?

If the properties are sold for less - what happens then?

I am sorry for so many questions but I am clueless when it comes to these kind of things.

dunstonh

who decides what to do with my estate?

You do with your Will. If you have no Will then your executor will need to follow the laws of intestacy. That could see your assets sold even if you didnt want them to be and the wrong people benefiting.

If the properties are sold for less - what happens then?

Any other assets you have are sold or used to pay your debts.

ACG

Do you have a will set up?
If you do it will be whoever you set up in that. If not, then someone will have to apply to do it once you die (how depressing is that last bit!).

If the properties are sold and there is more money left over - it will be paid to your estate and it gets dished out to your next of kins, if there is a shortfall then that gets taken from your estate. If there isnt enough left in the estate then the debts die with you and are not passed on to your kids.

BAK68

Dunstonh - thanks for your help - if I dont have a will what happens to the debts?

If I have a will and there are no more assets what happens to the debt?

BAK68

ACG thanks again. I really dont know what I would have done if I had not joined this forum.

How do I place the life insurance in a trust? is it done through a solicitor or through the insurance company?

jonesMUFCforever

If you owe more money in debt than you have in assets then the lenders will have to write off the difference.
You don't have to worry about any other family member having to take over the debts.

ACG

The insurance company will send you out the forms if you ask them.
There are a couple of different types of trusts (2 mains ones with the insurers).

Alternatively you can speak to a mortgage or financial advisor and they can get you the life cover, set it up for you and put it in trust. They dont usually charge as the commission is usually more than enough.

EDIT: you can do it through a solicitor, but why pay when you dont need to.

BAK68

ACG Thanks!!!! when the life insurance is in a trust, is there a way of making sure the beneficiaries use part of the money to pay off a mortgage?

or if i take out a 250k life insurance can i decide to place 100k in trust and the rest for a mortgage to be paid?

ACG

You have to set up trustees who will administer the policy as you wish. So you can provide a letter of wishes which basically says you want the mortgages to be paid off and the remainder goes to whoever.

You cant place part of the money in trust as far as im aware - its all or nothing. But you can state you want it to be used for certain things. You can also say you dont want your kids getting it until theyre a certain age.