IHT planning/ trust funds

Veneer

I was wondering if anyone can point me to a good information source/ give general advice regarding trust funds.

Currently am married with young children (primary school age), we have a house that is mortgage free.  I also have life insurance policy in place (level term).

I was wondering (generally speaking)  what is the best kind of trust to 1) pay life insurance in to 2) put the house into?

RAS

What do you want the life insurance to do? Make sure that your children are looked after in the best way possible? Or prevent it's use until they reach the age of majority?

What do you think you will achieve by putting the house in trust?

Veneer

RAS said:

What do you want the life insurance to do? Make sure that your children are looked after in the best way possible? Or prevent it's use until they reach the age of majority?

I have two life insurance policies - one for wife and one for children.
I the one for the children I would like to prevent use until age of maturity.

What do you think you will achieve by putting the house in trust?

1) skips probate  2) if i were to have any outstanding credit card debt/overdraft/small loans at the time they wouldn't hold up the probate process and give my family headache. 3) it ensures my kids some ownership/right to the house, in the event my wife were to remarry or whatever.

so basically worst case scenario planning for the kids.

Keep_pedalling

Veneer said:

RAS said:

What do you want the life insurance to do? Make sure that your children are looked after in the best way possible? Or prevent it's use until they reach the age of majority?

I have two life insurance policies - one for wife and one for children.
I the one for the children I would like to prevent use until age of maturity.

What do you think you will achieve by putting the house in trust?

1) skips probate  2) if i were to have any outstanding credit card debt/overdraft/small loans at the time they wouldn't hold up the probate process and give my family headache. 3) it ensures my kids some ownership/right to the house, in the event my wife were to remarry or whatever.

so basically worst case scenario planning for the kids.

The only valid reason is the 3rd one, probate is not required to transfer a share of a house to a surviving owner.

Having a will that creates an immediate post death interest trust is useful for couples where there is a strong chance that the surviving spouse would marry again. 

Something else to consider if you have not already done so is lasting powers of attorney (LPA). Loosing mental capacity though illness or accident can leave your loved ones in a worse financial mess than dyeing does. 

RAS

Others will comment but basically your desire to plan for the kids and desire to reduce IHT aren't always compatible.

If you want to minimise IHT, then under current rules leaving everything to your spouse is the most effective way. You can protect half your property value for the kids if you are tenants in common, leaving your share to the kids and your spouse a life interest. You need to talk both to your spouse and a good STEP lawyer before writing your will, and make sure the tenancy is severed.

You also need to check with your insurance providers that the pay-outs are arranged so that they are not paid into your estate. Presumably you also have pensions that pay to your spouse and children? Depending on the age of your children, have either you or your wife got term insurance that pays out if she dies? 

So much to discuss, and probably time to see a financial advisor and a STEP lawyer.