Joint Life Insurance in Trust

s_glover

We are an unmarried couple with a mortgage and 2 joint life decreasing policies to cover the mortgage.

I am wondering if there is any benefit to putting the policies in Trust?

From my reading, my understanding is as joint policies, they would both pay out the a surviving partner (assuming >30 days survival). Is this correct?
Would having the policies in Trust speed up the payout or is this only the case in single policies?

Also if we were both the die, i assume the payout from the policies would be distributed with our other assets as stated in our wills, is this correct?

Weighty1

firstly, by not having the policies in trust, as you are unmarried, would it make the assets in your estate exceed £325,000 in which case inheritance tax would be payable?

My second question is why do you have 2 joint life policies? If you only have 1 mortgage then 1 joint life plan would have been sufficient.

dunstonh

I am wondering if there is any benefit to putting the policies in Trust?

With mortgages, if joint owner, joint life, first death policies, no.

From my reading, my understanding is as joint policies, they would both pay out the a surviving partner (assuming >30 days survival). Is this correct?

The survival rule you are referring to sounds like it is for critical illness cover and not life assurance. If you die, you die. There is no survivability rule in respect of life assurance. Only CIC.

Also if we were both the die, i assume the payout from the policies would be distributed with our other assets as stated in our wills, is this correct?

One of you would be deemed to have died first.

Would having the policies in Trust speed up the payout or is this only the case in single policies?

no it wouldnt speed it up in this case (as long as its joint owner as well as joint life - which it should be but theoretically may not be - I have seen single owner, joint life plans a number of times before).

If the life assurance was for family protection, then its a different matter.
Why two life assurance plans?

s_glover

We took out one joint life policy nearly 7 years ago covering our the outstanding mortgage on our previous property. We have recently moved and have taken on a considerably larger mortgage, we have kept the original policy and taken on an additional decreasing policy to cover the additional mortgage borrowing.

s_glover

If the estate was to exceed £325,000, would placing the policies in Trust avoid the need to pay inheritance tax?

Weighty1

s_glover wrote: »

If the estate was to exceed £325,000, would placing the policies in Trust avoid the need to pay inheritance tax?

Yes, but ignore my first post! As it's a joint life policy the proceeds pay directly to the survivor so the proceeds wouldn't enter your estate anyway.

Typically though a plan written into trust doe not enter the estate of the deceased and therefore DOES assist with mitigating IHT.

s_glover

So, if the proceeds of a joint policy pay directly to the survivor, there is little benefit to having it 'In Trust'?

Weighty1

That's correct. In fact, ordinarily you will be creating a gift with reservation by writing the plan into trust IF you want the proceeds to go to the survivor. Some providers do have the 30-day survival clause you refer to, but not all.