Putting life insurance into a trust

SantaKlaus

I have just received my Aviva discretionary gift trust (protection) pack/forms. I'm a bit confused, i thought i could just put beneficiaries on it and then they would get the insurance pay out fast if i died... but no, i need a trustee, why is this? all i want to do is get the pay out to my wife as fast as possible, not give it to a trustee to say how/when she gets it.

Should i make my wife the trustee? is there a negative side to that?

Ideally i didn't want the money to go to my estate, i wanted it to go to my wife, she can then decide if she keeps it or pays off the mortgage with it. It isn't a lot, it will only just pay off the mortgage with no money left over. I think there would be no inheritence tax on it (80k) so now not sure if i should put it into a trust. Although if i didn't then the estate would get it and pay off the mortgage wouldn't they??

InsideInsurance

You have to have a trustee because there is a trust and you arent going to be about to control the trust by the fact you are dead.

Assuming you are leaving it 100% to her then its ok though there can be some issue if you are both killed in the same incident

SantaKlaus

How do i get it to go to my son (still a baby) if both myself and my wife are killed? do i just put the trust money payout in my will? not sure how wills and trusts work lol.

Quentin

Not a recommendation for the company, but general info on trusts here:

http://www.legalandgeneral.com/_resources/pdfs/life-cover/trust-information/Trust-Form-Overview.pdf

InsideInsurance

They work independently from each other, a major part of the idea of having a trust is that the money moves outside of your estate.

Read http://www.legalandgeneral.com/_resources/pdfs/life-cover/trust-information/Absolute-Trust-Form-Guide.pdf for a 101 on trusts. Generally its best to have two trustees

kingstreet

I always suggest three if the settlor is to be a trustee.

SantaKlaus

InsideInsurance wrote: »

They work independently from each other, a major part of the idea of having a trust is that the money moves outside of your estate.

Read http://www.legalandgeneral.com/_resources/pdfs/life-cover/trust-information/Absolute-Trust-Form-Guide.pdf for a 101 on trusts. Generally its best to have two trustees

Yes that's the only reason why i was thinking about putting it in a trust, but it seems like the down point is that the trustee can say which beneficiaries get what and when they can get it, even how much of it. thats what it reads like there anyway.

TBH after reading that, there is only one option now and that is to make the mrs the trustee and beneficiary.

SantaKlaus

kingstreet wrote: »

I always suggest three if the settlor is to be a trustee.

How come ? ? ?

kingstreet

If the settlor is a trustee and you only have one other trustee, the trust fails when the settlor dies.

Hence, you need two trustees, plus the settlor.

SantaKlaus

kingstreet wrote: »

If the settlor is a trustee and you only have one other trustee, the trust fails when the settlor dies.

Hence, you need two trustees, plus the settlor.

What happens when it fails? I thought if i only had my wife as a trustie then it would be ok? so if i only had her as a trustie and then i died, does the trust fail?? :eek:

busicat

Don't worry, SantaKlaus. The trust wouldn’t "fail" when you died.

If there’s just your wife as trustee and default beneficiary, and you want her to get the money, all is well (apart from your recent demise obviously!) – you’ve saved several weeks / months of her having to wait for probate before Aviva can pay her.

You can stop reading here if that’s all you care about!


The only bit that wouldn’t work so smoothly is completely academic for most people: i.e. if Mrs SK decided she wanted to keep the money in the trust and use the option under the trust to change the beneficiary from being herself after you died…that option requires two remaining trustees. This is only of interest for wealthier people doing estate planning rather than straightforward family protection. (And even then, a lawyer would be able to sort it out – Aviva’s form doesn’t make it obvious, but Mrs SK would be able to appoint another additional trustee to make the changes of beneficiary with. )

No wonder people get confused with trusts.
Time we did like the Aussies for straightforward protection, and just allowed for us to nominate who we want to get the money, so our bereaved don’t have unexpected money delays (or get asked to sign indemnity forms for early payment). Then life cover will do what it says on the tin – “insurance that pays out when you die”