Family Income Benefit and Inheritance Tax

DaveTheHedgehog

Hello

I have a question.
My Wife and I both have separate Family Income Benefit insurance.

My Wife owns the plan which pays out on my death.
I own the plan which pays out on her Death.

They are each for £20,000 a year for 25 years (starting a few months ago).

The purpose of the plans are to look after the family if one or both of us die.

My question is, if we both died tomorrow, would there be inheritance tax to pay?

This is because 25 years * 20,000 = 500,000 for each Policy.
For my wife and I this would be 1,000,000 pounds, whihc would take us over the 600,000 threshold?

Does anyone know how the Inland Revenue would treat this on second death?
Thanks

David

dunstonh

There would be no IHT on first death but on second death the money would be within the estate (i.e. when you both are dead and your assets pass to children etc).

This is unless you place the FIB in trust to the children in the first place.

DaveTheHedgehog

Hi, Can I do that though if my wife owns my policy and I own hers.

I the Trust form for Legal and General it says
"
Under current lawhowever, when a settlor includes him/herself in the list of potential beneficiares this is classed as a 'reservation of benefit" under the finance act 1986"

They are Legal and General Policies.
Have I made a big mistake here? Should I have been the owner of my own policy and put it in trust, and made my wife the owner of her Policy and put it in trust with the opposite spouse and children as beneficaries?

Is there anyway out of this mess I have made?