UK life assurance question regarding a beneficiary

cyberfuits

Hi

I am looking for advice and reassurance on life insurance with critical illness. This policy was taken out privately for coverage of a mortgage. The mortgage has since being paid back. The assurance company says that currently, the life insurance is unassigned, therefore i ask them this in a letter

I understand that in the event of my death there is no beneficiary nominated in the above policy. I further understand that this is a critical illness policy which has got several benefits, however, it is in my understanding that I still can appoint a beneficiary for the event of my death; which would leave all the other benefits paid to me and only the Death benefit would be paid to my beneficiary on my death.  In the event of my death the Death Benefit of the named policy should be paid to in the first instance to my wife.

They said that they could not do this but did not explain why, because they are not allowed to sell or advise; only a broker could do this. My question is how can i get this done and if i die, will my wife get paid?

sheramber

If the policy is unassigned then the payment on death will be paid to your estate.

cyberfuits

sheramber said:

If the policy is unassigned then the payment on death will be paid to your estate.

That is what i do not understand,i got a will stating everything goes to my wife in the first instance, not sure what it means by estate in this case?

dunstonh

It is worth checking terminology.  An assignment is what it is called when you want to change the policy owner for example.

I understand that in the event of my death there is no beneficiary nominated in the above policy.

Correct.  You don't name a beneficiary on a life assurance policy.

 however, it is in my understanding that I still can appoint a beneficiary for the event of my death; which would leave all the other benefits paid to me and only the Death benefit would be paid to my beneficiary on my death. 

You can place the policy into trust and select an appropriate trust that does that.
Is your policy set up with you as sole owner and sole life assured?  Or is a joint owner policy?  
How the policy is set up can dictate if a trust is needed or not.  For example, setting it up as a joint owner policy would see the other policy owner receive the benefits.  e.g. spouse if they are the joint owner.  So, a trust would not be necessary (caveats that there are scenarios that can still make trusts suitable).  Or life of another policies where the owner is the spouse and you are the life assured.   That would go direct to the owner if you died.
If it is covering a mortgage, then you would not normally place it in trust as the debt cancels out the payout (again caveats apply as some circumstances may exist where the debt in the estate is beneficial and having the payout outside of the estate is better -  basically high net worth inheritance tax cases).

That is what i do not understand,i got a will stating everything goes to my wife in the first instance, not sure what it means by estate in this case?

Your estate is everything that you own when you die.  If the life assurance is not in trust and you are the sole owner of the life assurance then the money is paid to you.  You would dead, so it becomes part of your estate.  If your wife is the sole beneficiary of your Will, then she inherits your estate and by default inherits the life assurance payout.     In that scenario, it may still be worth having it in trust to speed the payout up.    Or have a joint owner policy which would also speed it up in the same way.

You say this is covering a mortgage. So, does it need to be set up in trust in your case? 

cyberfuits

dunstonh said:

It is worth checking terminology.  An assignment is what it is called when you want to change the policy owner for example.

I understand that in the event of my death there is no beneficiary nominated in the above policy.

Correct.  You don't name a beneficiary on a life assurance policy.

 however, it is in my understanding that I still can appoint a beneficiary for the event of my death; which would leave all the other benefits paid to me and only the Death benefit would be paid to my beneficiary on my death. 

You can place the policy into trust and select an appropriate trust that does that.
Is your policy set up with you as sole owner and sole life assured?  Or is a joint owner policy?  
How the policy is set up can dictate if a trust is needed or not.  For example, setting it up as a joint owner policy would see the other policy owner receive the benefits.  e.g. spouse if they are the joint owner.  So, a trust would not be necessary (caveats that there are scenarios that can still make trusts suitable).  Or life of another policies where the owner is the spouse and you are the life assured.   That would go direct to the owner if you died.
If it is covering a mortgage, then you would not normally place it in trust as the debt cancels out the payout (again caveats apply as some circumstances may exist where the debt in the estate is beneficial and having the payout outside of the estate is better -  basically high net worth inheritance tax cases).

That is what i do not understand,i got a will stating everything goes to my wife in the first instance, not sure what it means by estate in this case?

Your estate is everything that you own when you die.  If the life assurance is not in trust and you are the sole owner of the life assurance then the money is paid to you.  You would dead, so it becomes part of your estate.  If your wife is the sole beneficiary of your Will, then she inherits your estate and by default inherits the life assurance payout.     In that scenario, it may still be worth having it in trust to speed the payout up.    Or have a joint owner policy which would also speed it up in the same way.

You say this is covering a mortgage. So, does it need to be set up in trust in your case? 

Thanks for the comprehensive Answer, the policy is just in my name, in answer to your statement You say this is covering a mortgage. , no it was covering a mortgage but the mortgage was paid back and the building society informed the life insurance company about this, that is when it became a no beneficiary nominated. I just continued the policy as it is quite a good one. I just want it to make it that my wife can get the money speedily, but I can not change it to a joined policy.Apparently the only way to do this is to make her the beneficary, but the will not.

Weighty1

In that case, the easiest way of dealing with this would be to write the plan into a trust.  They should be able to provide the trust form, although may ask what sort of trust you want.  In 99% of cases a discretionary or flexible trust is used and you would add your wife as both a trustee and a beneficiary.

dunstonh

I just want it to make it that my wife can get the money speedily, but I can not change it to a joined policy.

You can make it jointly owned by assigning it but as weighty says, a trust would be easier.

cyberfuits

dunstonh said:

I just want it to make it that my wife can get the money speedily, but I can not change it to a joined policy.

You can make it jointly owned by assigning it but as weighty says, a trust would be easier.

if i do a trust do i have to change my will?

dunstonh

You dont need to change your will.   That will still handle the estate.  It just means that the life assurance will no longer be paid to the estate.