Life Insurance - Putting in Trust question

sva14

I am taking out a life insurance policy in joint names husband and wife. We have 1 child.

It will pay out on first death. I am considering putting the policy in trust by completing the pages on the application form for "in trust". so i can avoid IHT

I have a few questions

1) If I write the beneficary as my daughter, then my spouse will not get the maney is this correct?

Ideally the chain of money we would like should go to wife / husband > then Child?

2) Or is trust no good for joint policy life insurances?

What is best way to do this and avoid IHT?

Thanks

localhero

Hi Satish,

1) Yes
2) Yes you should put the life policy into trust.

The advantages are that the nominated beneficiary will receive the proceeds directly (rather than going through probate), and secondly the proceeds will not be subject to IHT.

You could therefore ask that your nominated beneficiary shall be spouse, but if spouse has predeceased then to a, b etc. Life company trustees generally have discretion, but are likely to carry out your wishes if they can.

Remember though that even by doing this the proceeds will form part of the estate for IHT purposes of the surviving spouse.

If in later years however, you are both comfortably off and wish to minimise IHT on second death, then you could amend the nomination so that the proceeds pass straight to the child/children instead of surviving spouse.

Similarly if you have death in service benefits attached to a pension scheme you should nominate who should receive those benefits.