Joint Life Assurance, trusts and co-habiting

Legacy_user

Hi, my girlfriend and I are in the process of taking out a joint life policy to cover the mortgage if one of us dies. We are buying as 'tenants in common' - if that helps.

I have read putting the policy in trust is advisable for IHT purposes, but I have also read that for co-habitees it is not advisable - but I don't know why!

Our intention is that if one dies, the mortgage is paid off plus we are going to set up wills so both halves of the house go to the survivor.

My questions are:

1) Should we place the policy in trust as co-habitees? If not what is the explanation.
2) As we're both named on the policy do the proceeds go to the other person on death with no IHT liability anyway?

Many thanks if you are able to help here.

Balfralf

MissKittyVentura

I don't know about the co-habiting not beiong able to go into trust. I certainly have seen plans where non married couples on a joint life plan put pland into trust so it should be doable. It just may not be advisable.

Writing a joint life plan into trust would mean the named beneficiaraies would have to benefit. So even if one of you dies the money would go to the named beneficiaries rather than the remaning living life assured on the plan. This can vary trust to trust I.E some companies may have specific trusts to enable the remaining Life assured to benefit and the trust only come into plan when both lifes assured die. Or you may need a unique trust to be drawn by a solicitor.

localhero

They should be put in trust for the benefit of the nominated beneficiary(s). They will then receive the money directly upon death.

Without a nominated beneficiary the proceeds are paid to the estate which means a delay in receiving the money, and for IHT purposes they will be part of the estate.

dunstonh

mortgage life protection is rarely placed in trust and mostly doesnt need to be. However, there can be occassions when it is worthwhile.

System

Thanks for all your advice so far.

One thing I think I should have pointed out is that the only beneficiary is to be my girlfriend - i.e. no other named beneficiaries like children etc.

If this is the case would any proceeds always go to the joint named person without admin delays and without IHT liability?

Thanks

dunstonh

If it is joint life, joint owner then you dont need to write it in trust as the surviving owner will be paid the money outside of the estate. Only if you did single life/single owner would you need to worry about that.