Life Assurance in Trust - I'm confused !

Kev64

Hi,

Using Martin's recommended brokers, Cavendish online, I have completed an application for life cover for £150,000 with Legal & General. However, before I send off the form, I'm wondering whether I should be putting this into a Trust or not ?

The sole beneficiary would be my wife, and the sum is nowhere near the Inheritance Tax level. What, if any, advantages would there be to me putting it into a Trust ?

...and more to the point, if there are any advantages, how do I set it up without help ? The Legal & General form is very confusing and as Cavendish are 'execution only' brokers, I'm unlikely to get any help from them. I really don't want to mess this up.

lisyloo

The sole beneficiary would be my wife, and the sum is nowhere near the Inheritance Tax level.

Inheritance between spouses is exempt from inheritance tax, so there is no issue on first death.

The scenario that is often considered for trusts is second death. For example let's say your wife gets this payout. When she dies then her estate could be larger than the IHT limit now that she has inherited everything from you. Therefore one way round this is to put your half of the house in trust for other beneficiaries (often kids). The wife can make use of the house whilst alive, but on second death it passes to the beneficiaries directly as she never owned it so it does not become part of her estate, hence lowering the total of her estate (hopefully into the nil band).
However I must admit that I have never addressed this personally as I'm under 40 and have no kids. I don't think many people get further than first death.

I really don't want to mess this up.

There is no issue on first death.
In general I have to say that there isn't any shortcut to this.
If you want proper advice then you have to pay.
Solicitors are expensive but in my view no-one can afford to mess this up, so there really isn't a way round it.
If you find it too difficult to pay in a lump sum and you have time on your side then save up a few quid a week and do it when you have enough money. It might be less painful that way than paying a lump sum.

dunstonh

Speed of payment is another good reason for putting in trust. However, you can create the same outcome without using a trust by using joint owner, single life or life of another (where owner is wife and life assured is husband or vice versa or parter if applicable for others reading).

If you want proper advice then you have to pay.
Solicitors are expensive but in my view no-one can afford to mess this up, so there really isn't a way round it.

Or IFAs. However, use of a solicitor or IFA would negate the cost benefit of doing it yourself. DIY is cheaper but you take on responsbility for getting it right. If you get it right then it is money saved. If you get it wrong the consequences can be far more costly. Some things you have to decide if you are capable of doing or not and if it is worth going DIY. I am useless at painting and decorating and really anything manual. I always get someone in to to those things. It costs a bit more but its cheaper from the point of view it gets done right.

MSE is about value for money. Not making mistakes by doing it too cheap. You need to decide if it is something you want to do yourself and accept the risk for doing so. Remember that if you DIY there is no protection from the FOS. You cannot blame someone else. Indeed, it is that reason why you get discounted as you do.

Kev64

There is no house (we rent - can't afford to buy), and no kids. All I want is to make sure that if I die, my wife gets the money (without it taking months to come through). Are you saying I can achieve this simply by making my wife the policy owner ? I don't want to overcomplicate this unneccessarily, by for example, putting it into Trust, when, because of the simplicity in my situation, I have no real need to.

dunstonh

If your wife if the policy owner and you are the life assured then the money isnt paid to any executor but paid to the owner. That speeds it up and you dont need a trust document.

Kev64

Thanks for that. Much appreciated. Whilst I'm here, and finally, what is the situation if I die owing money ? e.g. credit cards - would my wife be liable for the debt ? Would putting a policy into Trust have any effect on that ?

dunstonh

Generally they cannot come after her for your debts. However, where do you draw the line with items that were jointly owned? They will come after those. Its best to make sure there is enough to clear debts in the life sum assured.

sisterfleurtle

You mention having to pay for advice...firstly it's very poor practice if Cavendish will not provide you with advice on application given that they will be the ones taking all the commission on the policy. L&G have their own finanical advisors (free of charge and over the telephone) I would go directly to the company and ask for advice on Trusts in relation to the particular product.

dunstonh

You mention having to pay for advice...firstly it's very poor practice if Cavendish will not provide you with advice on application given that they will be the ones taking all the commission on the policy.

Cavendish dont take any commission. They are execution only brokers. Most IFAs will do execution only business but Cavendish have it like a factory line.

L&G have their own finanical advisors (free of charge and over the telephone)

It certainly is not free of charge and L&G pricing by going direct is one of the most expensive ways to buy an L&G product. Only buying L&G from the few banks they are linked to is more expensive. I cannot believe that you would think L&G give free advice.

I would go directly to the company and ask for advice on Trusts in relation to the particular product.

This is a money saving site. Not a pay more site.