Putting Life Insurance in a Trust or just stipulate in will?

il638 · 14 May 2018 at 3:39PM

Hi All,

New to this side of things and just after advice from those in the know. me and my partner have two solo policies with beagle street for 140k.

weve been told to put them in a trust as we have a little one. but I don't trust anyone around me to pay my son the money.

basically we both want the life insurance policy money to go to each other to cover the mortgage and also the ability to raise our kid without the need to have to work immediately.

should we both die in a freak accident at same time we want it to just get paid out to our kid who is just 2 year old atm and /or any future kids. should one of us die, then the other partner can take care of it as they will be raising the kid.

if we need a trust for this how do we go about it? I guess if we both die then we wouldn't mind a portion of the money going to whoever or whichever family member ends up looking after our son however I would want the mortgage clearing for him on our house first.

im completely clueless on this and want to write a will soon as well as sort this life insurance policy so it is paid quickly and easily to my wife and son and vice versa should anything happen.

any links/advic would be much appreciated.

thanks

HappyHarry · 14 May 2018 at 3:58PM

There are two key benefits to putting the policies in trust, which are both based on the fact that the benefits do not fall into the donor's estate.

1. The beneficiary does not need to wait until probate is completed in order to receive the funds. Life companies usually pay out benefits far faster than probate takes to complete, so by using a trust, the beneficiary can get the proceeds faster.

2. Inheritance tax. The benefits in the trust are not part of the donor's estate for IHT purposes. With no trust, the benefits are liable for IHT.

Important questions:
(i) Are you and your partner married or in a civil partnership? If not, then IHT could be an issue on first death.
(ii) Do you have a will in place? If not, then you and your partner may not benefit fully from the proceeds, even if you are married/civil partnership. Your children might receive some of the benefits instead. If you are not married/civil partnership and have no will, then the surviving partner will not receive anything, and the child(ren) will receive all the benefit.

To put the plans in trust, speak to the insurance provider who should have forms, or your solicitor who is drawing up your will.

System · 14 May 2018 at 7:37PM

il638 wrote: »

I guess if we both die then we wouldn't mind a portion of the money going to whoever or whichever family member ends up looking after our son

You need to sort that out I think, and make formal arrangements for a named person to take on that responsibility. In our family we have generally had mutual agreements between two siblings to take on each other's offspring. But you also need to make parallel arrangements so that they would receive the money to be able to do that.

il638 · 1 June 2018 at 6:49PM

hi we don't have wills yet, need to sort that and yes we are legally married via civil marriage.

Owain_Moneysaver · 1 June 2018 at 9:16PM

HappyHarry wrote: »

There are two key benefits to putting the policies in trust, which are both based on the fact that the benefits do not fall into the donor's estate.

and

3. A child under 18 cannot receive a bequest direct, so a trust will have to be set up even if 1 and 2 do not apply or are not regarded as important.

Putting Life Insurance in a Trust or just stipulate in will?

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