Life insurance passing into trust

Travman25

Maybe I should not be surprised by the lack of clear guidance but currently working through the paperwork after the death of my father. 

He had a life insurance policy which looking at a copy of the paperwork he completed at the time of setting it up pays the proceeds into 'trust'.

Would this trust have been registered?

The money will pass to my mother as trustee and then she will pay on to my sister and I as beneficiaries.

Do we need to do anything else? inform tax office? presumably the trust closes after the money is paid on - do we need to close it?

The HMRC gives guidance but assumes some knowledge of the type of trust and the set up process that we do not have.

Any help really appreciated at this time?   

Marcon

There's a fair amount of general guidance on the internet - this was one of the better examples I could find: https://www.legalandgeneral.com/insurance/life-insurance/guides/life-insurance-trusts/

If you talk to the insurer providing the policy, they may well have some useful guidance they can send you.

Travman25

Thank you so much for taking time to reply  - I had seen that page actually and it is one of the clearest however does not address the full implications after death. The insurer just issue a disclaimer saying you may need to register it with HMRC and check with a tax advisor. 

poseidon1

Travman25 said:

Maybe I should not be surprised by the lack of clear guidance but currently working through the paperwork after the death of my father. 

He had a life insurance policy which looking at a copy of the paperwork he completed at the time of setting it up pays the proceeds into 'trust'.

Would this trust have been registered?

The money will pass to my mother as trustee and then she will pay on to my sister and I as beneficiaries.

Do we need to do anything else? inform tax office? presumably the trust closes after the money is paid on - do we need to close it?

The HMRC gives guidance but assumes some knowledge of the type of trust and the set up process that we do not have.

Any help really appreciated at this time?   

There is explicit exclusion from HMRC registration requirements where a policy trust is paid out within 2 years of the life assured death - see link below

https://www.trusteeregistrationservice.com/whichtrustsareexempt

However, to be clear, was this a regular annual premium policy, which now pays out a predetermined amount that was set when your father took out the policy and now automatically pays out that cash sum on his death? If so then all good.

However, the alternative would be a single lump sum investment policy whose valued varied up or down depending on the underlying investment performance. Such a policy might not automatically payout on your father's death if he chose to write it on a joint life of himself and your mother. 

Such policies have certain flexibility in terms of how you deal with them on death of the settlor (your father). Choosing to encash them may produce an unwanted  but potentially avoidable tax liability. So although as indicated above there is no obligation to enter such a policy trust on the HMRC register (subject to the 2 year payout requirement), the trustee may nonetheless trigger a trust tax liabilty if care is not taken.

Travman25

Thank you for taking the time to reply