Life insurance and inheritance

JMCF81

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

Keep_pedalling

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

JMCF81

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

I understand that. We've jointly agreed that's why we are taking a life insurance policy to "buy out" the other person's children. 
There is no question that which ever one of us might die, the remaining partner will 100% give the children the pay out.

We just want to know what the proper steps of paying the children the money to limit the tax issues.

poseidon1

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

I understand that. We've jointly agreed that's why we are taking a life insurance policy to "buy out" the other person's children. 
There is no question that which ever one of us might die, the remaining partner will 100% give the children the pay out.

We just want to know what the proper steps of paying the children the money to limit the tax issues.

Despite your partner's objections, a civil partnership could greatly simplify IHT planning by bringing into play up to  £1 million in nil rate bands  ( for the survivor) rather than  the more modest and complicated £500k each,  you have at present.

As for the desire that the surviving partner will payout to deceased partner's children's 'inheritance' (from insurance policy proceeds) I can't see how that can be made a legally binding obligation in the deceased partner's will ( or in any other fashion),  so this will  be a question of trusting each other to do the right thing when the time comes ( not something I would be comfortable with in these circumstances).

I hope the solicitor you eventually  consult can make a convincing case for a civil partnership between you.  Financial arrangements between blended families is complicated enough without making it more so by refusing to tie the knot. For example gifts of assets/ cash between unmarrieds can have IHT and CGT implications, which disappear for those with married/ civil partnership status, 

JMCF81

poseidon1 said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

I understand that. We've jointly agreed that's why we are taking a life insurance policy to "buy out" the other person's children. 
There is no question that which ever one of us might die, the remaining partner will 100% give the children the pay out.

We just want to know what the proper steps of paying the children the money to limit the tax issues.

Despite your partner's objections, a civil partnership could greatly simplify IHT planning by bringing into play up to  £1 million in nil rate bands  ( for the survivor) rather than  the more modest and complicated £500k each,  you have at present.

As for the desire that the surviving partner will payout to deceased partner's children's 'inheritance' (from insurance policy proceeds) I can't see how that can be made a legally binding obligation in the deceased partner's will ( or in any other fashion),  so this will  be a question of trusting each other to do the right thing when the time comes ( not something I would be comfortable with in these circumstances).

I hope the solicitor you eventually  consult can make a convincing case for a civil partnership between you.  Financial arrangements between blended families is complicated enough without making it more so by refusing to tie the knot. For example gifts of assets/ cash between unmarrieds can have IHT and CGT implications, which disappear for those with married/ civil partnership status, 

To be fair, even if we married/had a civil partnership, we'd still face the same issue. The children of the deceased will still require their share of the money, and this can't be provided unless the house was sold, something we wouldn't want the surviving partner to have to do.
The trust process goes both as we both have children that we'd want the surviving partner to do the right thing by. 
As we are both divorced and had to work amicably to work out finances with our previous spouses, and us both demonstrating we were the honest, fair party in these scenarios, and how we manage our shared finances now while we have a blended family, neither us is concerned about trusting each other.

Keep_pedalling

JMCF81 said:

poseidon1 said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

I understand that. We've jointly agreed that's why we are taking a life insurance policy to "buy out" the other person's children. 
There is no question that which ever one of us might die, the remaining partner will 100% give the children the pay out.

We just want to know what the proper steps of paying the children the money to limit the tax issues.

Despite your partner's objections, a civil partnership could greatly simplify IHT planning by bringing into play up to  £1 million in nil rate bands  ( for the survivor) rather than  the more modest and complicated £500k each,  you have at present.

As for the desire that the surviving partner will payout to deceased partner's children's 'inheritance' (from insurance policy proceeds) I can't see how that can be made a legally binding obligation in the deceased partner's will ( or in any other fashion),  so this will  be a question of trusting each other to do the right thing when the time comes ( not something I would be comfortable with in these circumstances).

I hope the solicitor you eventually  consult can make a convincing case for a civil partnership between you.  Financial arrangements between blended families is complicated enough without making it more so by refusing to tie the knot. For example gifts of assets/ cash between unmarrieds can have IHT and CGT implications, which disappear for those with married/ civil partnership status, 

To be fair, even if we married/had a civil partnership, we'd still face the same issue. The children of the deceased will still require their share of the money, and this can't be provided unless the house was sold, something we wouldn't want the surviving partner to have to do.
The trust process goes both as we both have children that we'd want the surviving partner to do the right thing by. 
As we are both divorced and had to work amicably to work out finances with our previous spouses, and us both demonstrating we were the honest, fair party in these scenarios, and how we manage our shared finances now while we have a blended family, neither us is concerned about trusting each other.

An immediate post death interest trust would solve the issue. The children of the deceased partner would not get there actual inheritance until the surviving partner had died, the house does not need to be sold as the surviving partner has the right to remain there but the children’s inheritance is protected. These types of trust works best for married couples or civil partners because Marrage / civil partnership avoids IHT in the first death and avoids CGT when the house is eventually sold. 

poseidon1

Keep_pedalling said:

JMCF81 said:

poseidon1 said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

JMCF81 said:

Keep_pedalling said:

What is your marital status? Is your life police written in trust? 

We aren't married, that's my partners choice not mine. He's refusing to marry even for tax purposes. We are both divorced.
Our life insurance is not written in trust, we are just straight forward benefactors if one of us dies, the other receives a payout of a set amount. The life insurance is due for renewal in December which is why we want to seek advice and make sure we are setting everything up properly and writing wills. We are 44 and 45.

In which case your insurance needs writing in trust to prevent it being subject to IHT. You should increase the amount insured to cover a potencial IHT liability if either of you have assets exceeding £325k. 

When you make your wills you should include a clause that sets up an immediate post death interest trust which will protect your children’s inheritance and allow the surviving partner to continue to live in your home. This would also require change ownership to tenants in common.

This is where I am confused and need to understand better. I'll use me dying as the example:

 We are Joint tenants and if I die, my partner becomes the sole owner of our property (we each have a 50% stake). That's fine and we aren't concerned about that.

We have a joint life insurance policy, if I die, he's the recipient of a lump sum of money. With that money, we've agreed that the mortgage can be paid off and provide a small sum for the surviving partner, thus relieving some financial burdens in a time of grief etc... 

Out of the life insurance money my partner has received, I'd like him to give/gift my children a fixed sum of money (that we've mutually agreed) in lieu of them receiving inheritance in the form of my % of our property.

That sum at the moment would be about 100k for each of my 2 children (aged 21 and 19) I have other assets but they don't exceed £325k total and I believe as direct descendants they get allowance upto 500k ?

As my partner would be giving my children money out of his insurance money received  following  my death, would they pay any form of tax ? (I am assuming yes as it far exceeds the gifting allowance).

What are the clear steps we need to set up both with the insurance policy and written in our will

1) to make it legal so we aren't breaking any rules.
2) protect from paying tax if able

As simply explained as possible would be great lol 

Appreciate all the advice 

If you are joint tenants then you own the 100% of the property jointly. TiC own a fixed percentage each. If you die first, your partner automatically owns the whole lot and they will be able to leave the house to whoever they wish so your children could inherit nothing from you. To prevent that happening you need to sever the tenancy and protect your children’s inheritance through your will.

I understand that. We've jointly agreed that's why we are taking a life insurance policy to "buy out" the other person's children. 
There is no question that which ever one of us might die, the remaining partner will 100% give the children the pay out.

We just want to know what the proper steps of paying the children the money to limit the tax issues.

Despite your partner's objections, a civil partnership could greatly simplify IHT planning by bringing into play up to  £1 million in nil rate bands  ( for the survivor) rather than  the more modest and complicated £500k each,  you have at present.

As for the desire that the surviving partner will payout to deceased partner's children's 'inheritance' (from insurance policy proceeds) I can't see how that can be made a legally binding obligation in the deceased partner's will ( or in any other fashion),  so this will  be a question of trusting each other to do the right thing when the time comes ( not something I would be comfortable with in these circumstances).

I hope the solicitor you eventually  consult can make a convincing case for a civil partnership between you.  Financial arrangements between blended families is complicated enough without making it more so by refusing to tie the knot. For example gifts of assets/ cash between unmarrieds can have IHT and CGT implications, which disappear for those with married/ civil partnership status, 

To be fair, even if we married/had a civil partnership, we'd still face the same issue. The children of the deceased will still require their share of the money, and this can't be provided unless the house was sold, something we wouldn't want the surviving partner to have to do.
The trust process goes both as we both have children that we'd want the surviving partner to do the right thing by. 
As we are both divorced and had to work amicably to work out finances with our previous spouses, and us both demonstrating we were the honest, fair party in these scenarios, and how we manage our shared finances now while we have a blended family, neither us is concerned about trusting each other.

An immediate post death interest trust would solve the issue. The children of the deceased partner would not get there actual inheritance until the surviving partner had died, the house does not need to be sold as the surviving partner has the right to remain there but the children’s inheritance is protected. These types of trust works best for married couples or civil partners because Marrage / civil partnership avoids IHT in the first death and avoids CGT when the house is eventually sold. 

Important to note, there would be no transferable NRBs available  on 2nd death, and on 1st death large proportion of that partner's £325k NRB is 'wasted' on the half the house passing to the surviving partner, whilst the £175k residential nrb disappears entirely.

Ordinarily the 1st partner to die might expect their £500k NRBs to be available on behalf of their own children. That simply cannot happen in this circumstance.

Worse still,  If each partner has significant DC pensions pots, then after 2027 there is a very good chance of an IHT liability on 1st death, reducing what can be inherited by the  surviving partner.

Therefore with only £500k of NRBs available to the surviving partner on 2nd death, there is a liklihood of a further IHT liabilty arising which would not otherwise occur if married.

sheramber

If the surviving partner is to gift half the value of the house to the other partner’s children, how will that value be decided?  Market value?

How will you ensure that the insurance policy payout will keep up with the increasing  value of the value of the house? 

While the outstanding mortgage could remain static the  miscellaneous expenses figure and the half value of the house will not. 

Taxes will depend on what rules are in place at the time. 

JMCF81

sheramber said:

If the surviving partner is to gift half the value of the house to the other partner’s children, how will that value be decided?  Market value?

How will you ensure that the insurance policy payout will keep up with the increasing  value of the value of the house? 

While the outstanding mortgage could remain static the  miscellaneous expenses figure and the half value of the house will not. 

Taxes will depend on what rules are in place at the time. 

The life insurance policy is renewed every 2 years and the figure adjusted accordingly to represent the equity in the house at that time period. The insurance money is in lieu or instead of the children receiving any money directly from the property, its just being used as a rough estimate to agree how much money to give the deceased partner's children so they aren't left with nothing when the house becomes the sole property of the surviving partner. 
We are only in our 40s, as we age and property value and finances change, different provisions may be decided. 

MyRealNameToo

JMCF81 said:

sheramber said:

If the surviving partner is to gift half the value of the house to the other partner’s children, how will that value be decided?  Market value?

How will you ensure that the insurance policy payout will keep up with the increasing  value of the value of the house? 

While the outstanding mortgage could remain static the  miscellaneous expenses figure and the half value of the house will not. 

Taxes will depend on what rules are in place at the time. 

The life insurance policy is renewed every 2 years and the figure adjusted accordingly to represent the equity in the house at that time period. The insurance money is in lieu or instead of the children receiving any money directly from the property, its just being used as a rough estimate to agree how much money to give the deceased partner's children so they aren't left with nothing when the house becomes the sole property of the surviving partner. 
We are only in our 40s, as we age and property value and finances change, different provisions may be decided. 

So you are buying a 2 year policy or you are buying a long term policy and just cancelling it every 2 years? 

What happens if one of you gets a significant illness thats non-termal but then makes the insurance unaffordable?  

How long is this going to be going for? Into your 90s if you are still living? Insurance at that age is expensive.