Life insurance payout - surplus income?

Larry12

Hi,

My wife passed away last year.  We had a life insurance that pays out if either of us passed away.

I've received the payout but I don't need money.  Can I treat it as surplus income and contribute towards my grandchildren's school fees on a regular basis?

Thank you.

Marcon

Larry12 said:

Hi,

My wife passed away last year.  We had a life insurance that pays out if either of us passed away.

I've received the payout but I don't need money.  Can I treat it as surplus income and contribute towards my grandchildren's school fees on a regular basis?

Thank you.

Condolences on the recent loss of your wife.

The payout itself will be treated as savings (capital) in years to come, but the interest it generates would be classed as income.

There is of course nothing to stop you contributing to your grandchildren's school fees as you see fit. It would take possible immediate financial pressures off the parents, and hopefully you will live long enough that not all of the gifts fall back into your estate on death. 

Larry12

Thank you.  

My health hasn't been great either.  Unfortunately, I haven't been very good at estate planning and left things very late - my children will probably end up paying quite a bit in IHT.  

Keep_pedalling

Larry12 said:

Thank you.  

My health hasn't been great either.  Unfortunately, I haven't been very good at estate planning and left things very late - my children will probably end up paying quite a bit in IHT.  

You say probably, but do you actually know this? If your house is worth more than £350k and your total net worth is less than £1M then your estate will be IHT free.

Nothing stopping you contributing to the school fees, but if your estate is in IHT territory, then perhaps a one off larger gift to your children might be a better option as that would increase the chances of all of it falling out of your estate if you live another 7 years.