Why different Assurances?

robert_harper_2000

With IHT why would you take these policies over the other?
1. Increasing Level Term Assurance
2. Level Term Assurance
3. Mortgage Protection Assurance

My father has all three. I've changed 1 & 2 so that they are written into Trust. All three cover Death only.

1. Increases 5% premium and payout.
Payout £163k Premium £60
Started 1997 21 year policy

2. Fixed
Payout £80k Premium £40
Started 2006 12 year policy

3. Fixed
£270k Premium £83
Started 2007 12 year policy

Surely Policy 3 would only increase IHT as it would lose the debt ( which could effectively decrease estates worth ). If this was Life cover written to trust it would payout without bothering Tax man.

Are these reasonable amounts for a 59 male non-smoker healthly slim lol what else?

Thanks for any advice I'm having trouble picking all this up on my own.

dunstonh

With IHT why would you take these policies over the other?
1. Increasing Level Term Assurance
2. Level Term Assurance
3. Mortgage Protection Assurance

You would take out whole of life assurance typically unless you are looking to mitigate a 7 year PET. In which case you would do a decreasing term assurance.

the-chauffeur_2

Robert

With IHT why would you take these policies over the other?
1. Increasing Level Term Assurance
2. Level Term Assurance
3. Mortgage Protection Assurance

Good question. Does your father know why he has all three?

As far as IHT liability goes, when he dies anything not written in trust will form part of his estate. As things stand, both his property and the proceeds of the mortgage protection policy will constitute his estate. So you're right - if the third plan was put into trust, the proceeds of the policy will also avoid the clutches of the tax man.

However, be aware that some policies contain an element of living benefit/terminal illness cover, which will pay out before the death of the policyholder - and this type of thing needs careful consideration when writing trusts. At the same time, if he's married, he (and his wife) needs to investigate arranging his affairs in such a way to make the best use of the nil rate IHT band and inter-spousal transfer arrangements. Frankly, if his total estate exceeds the nil rate IHT band (£300,000 I think) he should give some thought to getting some specialist tax planning advice.

Whether the insurance amounts are reasonable for a man in your father's position entirely depends on what his financial position is and what his objectives are. Assuming all of his policies pay on death only, it would seem his estate is reasonably well provided for, although without any detailed personal or financial details (married/single/income/outgoings/debts/investments...) it's impossible to say what other policies might be useful for him. And you could do with establishing whether he has/needs any form of income protection, or provision for ill health and so on.

If he's thinking of transferring parts of his estate while he's alive, Dunstoh's right - he should consider investigating a gift inter vivos policy (7-year DTA). But again, when you start thinking in those terms you're straying into specialist areas.

HTH

robert_harper_2000

He wasn't thinking of Transfering anything at the moment. He was intending to have the insurances to help pay for the Tax liability. I wanted to make sure he had the correct insurances. If the Mortgage doesn't require the Policy as a condition he would be better off covering it with a Policy which can be written into Trust such as a Life cover?

Is this line of thinking correct??

robert_harper_2000

also do you think it would be cheaper to try and get a policy covering everything in one go? Rather than three policies covering different amounts??

the-chauffeur_2

As far as the policy covering the mortgage is concerned, what you can do with it will depend on the terms of your father's mortgage lenders. Into the mid 1990's, lenders were insistent that the borrower arranged some form of life policy to cover the mortgage and then assigned the policy to them. The idea is that on the death of the policyholder, the insurance policy pays off the mortgage and any remaining cover is paid into the estate.

But over the years, this practice has kinda stopped. So before you do anything else, you'll need to know whether the policy is assigned to the lender (and whether assignment was a condition of the loan). With any luck it won't be - and if it isn't, he can put the policy into trust as it is (in other words, without changing it for another type of policy). All that would happen if he died before the end of the mortgage is that the debt would form part of the estate - and could then be repaid by the trustees.

But don't assume any views or opinions you find on the internet (including this post) are absolutely reliable or can cover every eventuality - especially where large cash-like prizes are involved. I'll say it again - get specialist planning advice. This isn't an area you want to mess about with, 'cos if you get it wrong, it can be an expensive mistake.

As far as consolidating the insurance policies goes, again the answer depends on a number of factors. Although the global trend for insurance premiums has been downward over the years, once you've passed the age of about 30, individual premium rates increase the later in life the policy is taken out. Added to that, your father's health and smoker status will be the biggest deciding factors in determining what his premiums will be.

Utimately, there is nothing to stop him deciding what level of cover he needs and getting some quotes together. If the new quotes are better value than his current arrangements, he can apply for a new policy - but make absolutely sure that he doesn't cancel any of the existing plans until any new plan is set up and in force.

HTH

robert_harper_2000

Thanks it is good advice. I'll contact the Mortgage company in the morning. When I phone previously they did suggest it will pay off the Mortgage in the event of death and that due to the type of Policy it cannot be written into Trust.