We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Put life insurance into a trust

Hi,

I have just been advised to put my life insurances into a trust.

I have 250k a 100k and a mortgage cover for 150k.

Can someone advise if its best to have them all in a trust and if so how i can do this.

Ehat is the benefits of a trust?

Anyone against putting them in a trust and if so why?

Many thanks in advance.

Comments

  • The benefits of a trust are that the money bypasses your estate should you pass away, so you don't have to worry about having to pay inheritance tax on the money. As a single person, if your estate is worth £325k+, including life insurance policies and the value of your home, less any outstanding mortgage, then you'll have to pay inheritance tax at 40% on everything above the threshold if you leave the money to anyone other than a spouse/civil partner.

    Having your life insurance in trust means the payout falls outside your estate for inheritance tax purposes and the cash can be distributed to your loved ones without having to go through probate. It typically works in that you're one of the named trustees, so can make any changes to the plan while you're still alive, and then you have beneficiaries of the trust, perhaps your children or spouse. The spouse may also be a trustee so they can manage the trust were you to pass away.

    For Mortgage Life Insurance there may be less of a need to write the benefit into trust because although the payment will go into your estate, the bank has a claim on it to pay off the loan and so it won't typically be liable to IHT as it will go straight back out again.
    This post provides guidance only. It does not constitute financial advice
  • Weighty1
    Weighty1 Posts: 1,196 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper
    For Mortgage Life Insurance there may be less of a need to write the benefit into trust because although the payment will go into your estate, the bank has a claim on it to pay off the loan and so it won't typically be liable to IHT as it will go straight back out again.

    It would still be better to have it in trust though as it would enable the mortgage debt to de-value the estate, rather than cancelling it out.

    OP did you not take the insurance via an adviser? Surely they would be able to help you with this? It should be standard practice for good advisers to recommend and assist with placing plans into trust. That said, I see a lot of lazy advisers who just don't, for various reasons.
  • ACG
    ACG Posts: 24,012 Forumite
    Part of the Furniture 10,000 Posts Name Dropper I've helped Parliament
    I agree with Weighty, if you went via a broker, get their advice on it.

    A trust is free, takes 10 minutes if you know what you are doing (maybe an hour or 2 if you do not).

    You should discuss the pros and cons are there are a couple of trusts to choose from and the best Trust will vary depending on what you want to happen if you pass and the policy pays out.
    I am a Mortgage Adviser
    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.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 346.5K Banking & Borrowing
  • 251.3K Reduce Debt & Boost Income
  • 451.3K Spending & Discounts
  • 238.7K Work, Benefits & Business
  • 614.1K Mortgages, Homes & Bills
  • 174.7K Life & Family
  • 251.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.