Life insurance policy questions!

edited 30 November -1 at 1:00AM in Insurance & Life Assurance
8 replies 1.4K views
sam1970sam1970 Forumite
1.2K Posts
Part of the Furniture 500 Posts Combo Breaker
✭✭✭
edited 30 November -1 at 1:00AM in Insurance & Life Assurance
Finally, and after 3 months wait, the insurance company accepted my application for life insurance policy (delayed because the lazy GP did not bother sending them my medical records even though he was paid handsomly for that). I have 3 questions please and I appreciate advice:

1- Can the insurer get out of paying on the policy if I die considering they have seen my medical records and that I told them every thing I know? I lived the first 20 years of my life outside the UK..Can they use that as an excuse? It is an expensive policy, as I am in my early fifties, so I dont want to take it if it is going to be useless.

2- I was advised to write the policy in a trust to avoid inheritence tax. Is it reasonable to put my wife as a trustee and my kids as the beneficiaries? What happens if me and my wife die in an accident?

3- If I write the policy in a trust, when will the family get the money? It is intended to help them pay the mortgage and in daily living (as my wife does not work) but if they will only get the money after a certain age that will leave them in a financial hardship till then!!

Advice will be much appreciated

Replies

  • NearlyoldNearlyold Forumite
    1.8K Posts
    Sixth Anniversary 1,000 Posts Combo Breaker
    ✭✭✭
    Answers

    1) If you answered all the questions honestly and they have seen your medical records you should have nothing to worry about in terms of the insurer finding excuses not to pay.

    2) Suggest you should also have your wife as a beneficiary, it's usual to appoint trustee(s) in addition to your wife to cover the situation where you both die. Are you using the insurance companies trust forms they often come with guidance? Alternatively if it's an IFA you have obtained the policy through he/she should be able to help you with the trust forms

    3) The money will be paid to your trustees as fast as the insurance company can process the claim, there is no probate involved as the proceeds are outside of your estate.
  • sam1970sam1970 Forumite
    1.2K Posts
    Part of the Furniture 500 Posts Combo Breaker
    ✭✭✭
    Thanks for that. Yes I am using the trust forms supplied by the insurance. So you are saying I should put my wife as a trustee and also as a beneficiary!!. Can you put a friend as a trustee or does it have to be a close relative?
  • kingstreetkingstreet Forumite
    36.8K Posts
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    ✭✭✭✭✭
    You, your wife and preferably a couple of other friends/relatives should be Trustees so that you have enough if two of you died together.

    The purpose of the Trust is to ensure benefits can be paid quickly by the Trustees, according to your wishes and without the need for probate, which means a lot quicker.

    The IHT benefit is a bonus!
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • edited 26 February 2016 at 11:21AM
    NearlyoldNearlyold Forumite
    1.8K Posts
    Sixth Anniversary 1,000 Posts Combo Breaker
    ✭✭✭
    edited 26 February 2016 at 11:21AM
    sam1970 wrote: »
    Thanks for that. Yes I am using the trust forms supplied by the insurance. So you are saying I should put my wife as a trustee and also as a beneficiary!!. Can you put a friend as a trustee or does it have to be a close relative?
    It's quite usual in these family trusts to have your wife as beneficiary and trustee.
    These links should help
    http://www.scottishwidows.co.uk/Extranet/Literature/Doc/51290
    https://www.aiglife.co.uk/documents/0853_AIG_Guide_to_trusts.pdf
  • edited 28 February 2016 at 4:07PM
    sam1970sam1970 Forumite
    1.2K Posts
    Part of the Furniture 500 Posts Combo Breaker
    ✭✭✭
    edited 28 February 2016 at 4:07PM
    Thank you guys. My next question is: Do I need to complete the trust forms before the policy starts? The policy will need to start before mid March (according to the insurer-L&G- or the premium may rise). The problem is I am moving house mid march so I would like to complete the trust forms with the new address to avoid any confusion in the future. Believe it or not..L&G call centre staff were unable to answer this question
  • NearlyoldNearlyold Forumite
    1.8K Posts
    Sixth Anniversary 1,000 Posts Combo Breaker
    ✭✭✭
    You can create the trust anytime after the policy is issued, check with L&G as there are sometimes different trust forms for pre and post issue.
  • kingstreetkingstreet Forumite
    36.8K Posts
    Tenth Anniversary 10,000 Posts Name Dropper Photogenic
    ✭✭✭✭✭
    The address isn't an issue.

    Get your cover in place now. Change the address later. FWIW the address is the policy address, there is no separate trust address.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • magpiecottagemagpiecottage
    9.2K Posts
    1,000 Posts Combo Breaker
    ✭✭✭✭
    One point you do need to be aware of - which only really applies to the Inheritance Tax issue - is that putting it into trust counts as a gift for the purpose of calculating the tax.

    This is not an issue if you are in good health at the time of the gift but if your health is poor, the plan acquires a value. Put bluntly, if somebody thinks you are about to peg it, they might offer to buy the policy and when you eventually pop your clogs they will take the payout from the policy - which will be more than they pay you.

    That means the plan will have a value. Even if you were not going to sell it, the value that it could have been sold for at the time would be used in calculating the tax.

    If you put the policy into trust at outset then the value at outset will be used.

    If you do not survive, then if a policy has been in trust for less than seven years, HMRC will look to see how likely it was that you would die within the remaining term of the policy when the trust started.

    If the policy was in trust at outset, it will accept this as indicating that it was more likely than not that, for its purposes, it would never acquire a value when the trust started (even though later it clearly would have done if you died and the policy paid out).

    Put it into trust later and HMRC is likely to want other evidence.

    So doing it at outset makes sense.
This discussion has been closed.
Latest MSE News and Guides

Energy price cap could be extended beyond 2023

New plans have just been announced by the Government

MSE News

Cheap contents insurance for tenants

DON'T assume your landlord covers you

MSE Guides

Summer sizzlers round-up

Incl £2ish sun cream & £1.50 disposable BBQs

MSE Deals