Life insurance written into trust, death of beneficiary

TheCyclingProgrammer

I've just taken out a term insurance policy for myself to provide for my wife and family if I die. I have been advised that I should consider writing the policy into trust and I've had a good read of the absolute trust documentation from my policy provider (L&G).

It all seems reasonable, but I'm a bit confused as to what would happen if the sole beneficiary (my wife) was to die before me. In short, I want to be clear that if this happened, my daughter (or children if we have another) would receive the policy payout.

Just to outline a few facts:

* My wife and I have mirror wills - written prior to but in contemplation of our recent marriage. They are fairly standard but in the simplest of scenarios: she inherits from me, I inherit from her, if we both go together our children inherit equally; if we all go then there are provisions for siblings to inherit and so on but lets not worry about that.

* I intend for my wife to be the sole beneficiary of the trust.

* The trust form I have from L&G is for an absolute trust, but split so that I would receive any critical/terminal illness benefits unless I opt not to.

As far as I understand it, the beneficiary of an absolute trust cannot be changed (fine) and as the donor I cannot benefit from the trust (not that I could benefit after my death anyway!).

What confuses me is if my wife died first, who would inherit her interest in the trust? According to her wills, it would be me, but doesn't that essentially leave me as the beneficiary of my own trust? Or would it skip me and go straight on to our children, making them equal beneficiaries?

In short, I don't care how it works as long as in the first instance, my wife would receive the payout or if she is no longer around, my children would.

Thanks!

Murphy2011

Not sure why the adviser would suggest an absolute or bare trust as this doesn't allow for any changes at all, what you are looking for could be achieved with an flexible split trust with a survivorship clause, this allows for the payments to be made to the child(ren) under trust in the event of you both dying together. The other benefit of a flexible trust is that if your wife does pre-decease you then you will be able to change the beneficiaries to reflect this (make sure you are the first trustee on the trust as well)

TheCyclingProgrammer

Murphy2011 wrote: »

Not sure why the adviser would suggest an absolute or bare trust as this doesn't allow for any changes at all, what you are looking for could be achieved with an flexible split trust with a survivorship clause, this allows for the payments to be made to the child(ren) under trust in the event of you both dying together. The other benefit of a flexible trust is that if your wife does pre-decease you then you will be able to change the beneficiaries to reflect this (make sure you are the first trustee on the trust as well)

Thanks for the reply - I sent the same query to my advisor who realised he meant to send me the discretionary trust form (L&G provide both) which he has now done. This does seem more like what I need. Thanks.