Putting Life Assurance Policy in to Trust

CallieRose

I am looking for some advice regarding my father’s Life Assurance policy.  He took out a policy with Abbey Life (now Phoenix Life) in 1969 so it is old but still ongoing and payments are being made in to it annually.  There is no expiry date or age limit.  He is now 94 and said he recently read in a ‘Martin Lewis’ article that if he puts his policy in trust, by asking the insurance company for a simple form, there will be no inheritance tax to pay on it.  The sum assured is £10,000, a small amount in today’s market but we will be over the IHT threshold so liable to pay 40% on it. 

In 1981 the policy was absolutely assigned to my mother (it was previously his brothers). Sadly, she passed away in 2013 and my father has a letter advising that her executors (myself and my two sisters) should now act as the policy owners and that the benefits of the policy should be dealt with in accordance with our mother’s Will.  Her Will left everything to my father. 

My father has recently written to Phoenix Life and asked for the necessary paperwork so that the policy can be put into trust and the reply says, “We do not have a suitable draft deed for this policy and the executors of the late Mrs T will need to seek independent legal advice to arrange for a suitable deed to be prepared and completed.”

What is the ‘suitable deed’ for?  Are we, Mum’s executors, effectively putting the policy in to trust to ourselves, also Dad’s executors and beneficiaries of his will?  Even if we don't put the policy in to trust, do we need the deed anyway?  I don’t really understand what putting the policy into trust involves, is it really as simple as just filling out a form?  

Sorry if this doesn’t make any sense, I am very confused and I am hoping someone can help me understand what I need to do.

Many thanks

dunstonh

In 1981 the policy was absolutely assigned to my mother (it was previously his brothers). Sadly, she passed away in 2013 and my father has a letter advising that her executors (myself and my two sisters) should now act as the policy owners and that the benefits of the policy should be dealt with in accordance with our mother’s Will.  Her Will left everything to my father. 

Who did the executors assign it to? - it sounds like they didn't

What is the ‘suitable deed’ for? 

The policy owner(s) is the one that places it in trust.  They need to decide the type of trust, any rules etc.  That is known as the trust deed.

 Are we, Mum’s executors, effectively putting the policy in to trust to ourselves, also Dad’s executors and beneficiaries of his will? 

If the executors of your mums estate failed to assign it when she passed away, then the executors of the estate are still the policy owners.

 Even if we don't put the policy in to trust, do we need the deed anyway?

The trust deed only exists if you place the policy in trust.

 I don’t really understand what putting the policy into trust involves, is it really as simple as just filling out a form?  

There are different types of trust and it can introduce different taxation.    So, you do need to understand what you are doing.  Especially if the policy is investment backed

CallieRose

Many thanks for your reply.