Set up to trust regarding tax 9 October 2022 at 11:45AM in Insurance & life assurance 3 replies 82 views

caldi9

Hi, we heard that above certain life insurance sums there is a large tax due. Has anyone ever set up a trust or similar so that in the event of death there isn’t any tax due for the children or partner? Thank you

Keep_pedalling

You don’t need to set up a trust, you just need to have the insurance police written in trust which meets it will fall outside your estate for inheritance tax purposes. If the beneficiary is a spouse or civil partner then it does not matter as spousal exemption will apply.

Weighty1

Keep_pedalling said:

You don’t need to set up a trust, you just need to have the insurance police written in trust which meets it will fall outside your estate for inheritance tax purposes. If the beneficiary is a spouse or civil partner then it does not matter as spousal exemption will apply.

a trust doesnt exist until the trust deeds are executed so you do, in effect, set up a trust when you complete the forms.

Weighty1

caldi9 said:

Hi, we heard that above certain life insurance sums there is a large tax due. Has anyone ever set up a trust or similar so that in the event of death there isn’t any tax due for the children or partner? Thank you

Yes!  Keep_pedalling is correct that there's no inheritance tax (IHT) between spouses but obviously, once the second spouse dies any money/assets in the estate ARE calculated towards IHT.  Even life insurance policies in trust can be subject to certain tax charges (periodic charges) every 10-years, so don't think you can get off scott free BUT these are only applied if the value of the trust is over the nil rate band (NRB) allowance at each 10-year anniversary.  This is why it can be advantageous to arrange multiple life insurance plans to ensure none go over this NRB limit.