Should I place life insurance in trust if non-resident

amark16

Hi all
I'm a non-UK resident but have a Life insurance policy with a UK based provider which I'm considering putting in trust. Here are the facts:

• I have dual nationality (Cyprus and UK)
• I lived in the UK between 2013-2017
• I now live and work in Cyprus permanently (I understand that I'm domiciled and resident in Cyprus)
• I have a personal life insurance policy with Legal and General which I set up while still in the UK, and is still in effect.

I want to ensure that the money from the policy will not be subject to inheritance tax once I die. Given the above, do I need to place the policy in trust to avoid inheritance tax, or will it be exempt from inheritance tax anyway, since I'm not resident or domiciled in the UK?

The 2nd question is:
My father-in-law owns a house in the UK. He is too residing and domiciled in Cyprus. In his will, he wishes to pass the house to us. Will this be subject to inheritance tax? If yes, can it be placed in trust to avoid this?

Many thanks!

Sandtree

Presumably you are only talking about UK Inheritance Tax and not any equivalent taxes that may exist in Cyprus?

Weighty1

You could write the life insurance in trust and property trusts do exist so your father could place the property into trust, although it can create chargeable events.  It would depend on the value of the property and the size of your life insurance plan as to whether this is worthwhile.  IHT and non-residents are not my area of expertise so I've nothing more to really add.

amark16

Sandtree said:

Presumably you are only talking about UK Inheritance Tax and not any equivalent taxes that may exist in Cyprus?

Yes, only talking about UK inheritance tax. I'm not sure what the Cypriot legislation is but thanks for mentioning, I'll make sure to check that separately.

amark16

Having had a quick look now, Cyprus fortunately has no inheritance tax. A person's estate is freely and wholly transferred to any beneficiaries without being subject to any tax. So I only need to know if I will have any obligations in the UK

Weighty1

amark16 said:

Having had a quick look now, Cyprus fortunately has no inheritance tax. A person's estate is freely and wholly transferred to any beneficiaries without being subject to any tax. So I only need to know if I will have any obligations in the UK

amark16 said:

Having had a quick look now, Cyprus fortunately has no inheritance tax. A person's estate is freely and wholly transferred to any beneficiaries without being subject to any tax. So I only need to know if I will have any obligations in the UK

You would if you UK assets were valued over £325,000 (if un-married).  This would include the life insurance, but if the life cover was placed into trust it receives it's own £325,000 nil-rate band and money held in trust over this amount is subject to a 6% 10-yearly periodic charge.  Ordinarily, whilst alive, this does not apply as the life insurance is not worth anything, unless you are terminally ill for example.