Joint Life Insurance in trust??

Chickenman1108

Hi Everyone
I hope you can help me.
My partner and I have just bought our first property. We have just taken out a joint life insurance policy (decreasing over 20 years). The main purpose of this was simply to pay off the mortgage if something were to happen to one of us.

We're not married (not have any intention of getting married).
We don't have (or want) children.
Neither of us has a will.

First question:
As it's a JOINT insurance policy (we only needed one payout as we have no dependants) would the payout automatically go to the surviving policyholder in the event that of us dies?
Or would it just go to our estate?

Second question:
I have heard about having the policy put into "trust". Whilst I understand the fundamentals of this, I'm struggling to see if this would benefit us, particularly if the answer to my first question is Yes (and the payout automatically goes to the surviving policy holder)?

As it stands neither of our estates would be subject to inheritance tax (and even once our mortgage is paid off we're unlikely to have more than the £325k required for inheritance tax to kick in).
We both have small families who are aware of the reasons that we took out life assurance (ie. to make sure that the mortgage is paid off should one of us die beforehand) so I doubt any insurance would be contested.

Basically, I just want to make sure that if I die my partner will be financially compensated (and vice versa, obviously). Morbid subject, I know, but if we're paying for it then it might as well be of benefit to us.

The other thing is, all of the advice that I have read online suggests that we seek legal advice before putting the policy into trust. Indeed, Aviva (who provide our policy) wont give any actual advice themselves. Would people generally agree that we need legal advice or is it all quite straight forward? What type of soilcitor deals with this sort of thing?

Thanks in advance for any advice you can all give :-)

dunstonh

As it's a JOINT insurance policy (we only needed one payout as we have no dependants) would the payout automatically go to the surviving policyholder in the event that of us dies?

As long as you have set it up as joint owner, joint life, first death then it will. (it must be joint owner as well as joint life).

I have heard about having the policy put into "trust". Whilst I understand the fundamentals of this, I'm struggling to see if this would benefit us, particularly if the answer to my first question is Yes (and the payout automatically goes to the surviving policy holder)?

In 95 times out of 100 you would not place a joint life, joint owner, first death policy covering a mortgage into trust.

The other thing is, all of the advice that I have read online suggests that we seek legal advice before putting the policy into trust. Indeed, Aviva (who provide our policy) wont give any actual advice themselves. Would people generally agree that we need legal advice or is it all quite straight forward? What type of soilcitor deals with this sort of thing?

Aviva are not financial advisers. They cannot give advice as they do not hold the regulatory permissions. You dont normally need legal advice as your IFA or protection adviser would give you the advice and put in place any trusts needed. Solicitors are only needed on more complicated trust work.

Whoever you are buying the life assurance from should be doing this if on an advised basis. Usually at no extra cost. If buying direct or through a non-advised service then you take on responsibility.

Chickenman1108

Thanks for this.
Do you know what benefits there would be if I DID put it into trust? If 95% of people with joint policies don't bother then the benefits cant be that great (which was kind of what I thought myself)?
And yet Aviva offer a particular type of trust that they say is ideal for joint policy holders. This is why I'm getting confused

Weighty1

I'd say it's more about the disadvantages of placing a joint life plan in trust, not the benefits. If a joint life plan is written in trust then the lives assured should not be beneficiaries as this would create a gift with reservation ie you are gifting the plan into trust but could potentially benefit from it. This can have negative tax implications.

There are some trusts which are designed for this purpose. They have a survivorship clause meaning if one of you dies then the money goes to the survivor but if they die within 30-days it goes into trust. That's probably what they are talking about.

kidmugsy

Chickenman1108 wrote: »

Neither of us has a will.

Why? Or, if you prefer, why not?

dunstonh

Do you know what benefits there would be if I DID put it into trust?

Probably none in this scenario but it would depend on whom you placed it in trust to.

If 95% of people with joint policies don't bother then the benefits cant be that great (which was kind of what I thought myself)?

I didn't say that 95% don't bother. I said it wouldn't be required in 95% of cases. Its about what is needed that matters. If you want the money to go to the other policy owner then you just need to make sure it is joint owner. It is possible to have joint life, single owner policies. You dont want single owner. You want joint owner.

And yet Aviva offer a particular type of trust that they say is ideal for joint policy holders.

Most insurers offer standard worded trusts for the two main types of trust that could apply. Although you can often use the trusts of any insurer with another insurer if one doesnt fit. I came across one a few years back that was using Royal London Trusts even though Royal London were not the insurer.

Chickenman1108

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Why? Or, if you prefer, why not?

No real reason. Until the recent purchase of our first property neither of us would've really had anything to leave behind, so there's been no great need for wills.
It's another thing we're going to try and sort out now :-)