Life Insurance, mortage and estate liabilities
bluep
Posts: 1,299 Forumite
I have two life insurance policies, both for £400k each (and the option to put both payouts into Trust). One daughter (not yet 18) that I want the majority of the payout and all of my estate to go to, and 2 other family members that I would like a small portion (5%) of the payouts to go to. I'm divorced and no current partner.
Outstanding mortgage of £200k on a £250k house and if I died right now, probably other liabilities of £20k once savings have been offset. So my estate is in an overall solvent position but under the IHT threshold before you take the life assurance into consideration. I wouldn't want the house to have to be sold to meet the outstanding mortgage or other liabilities. Equally I don't want the whole life insurance payouts to fall into my estate for IHT as they clearly exceed the £325k +£125k allowances.
So I'm trying to achieve:
- insurance policy 1 - 100% into trust, letter of wishes asks £220k paid to estate to pay off mortgage and meet other liabilities (does this work?), 10% paid to family member 1, 10% paid to family member 2, remainder held in trust for discretionary payments for my daughter's living costs/school fees/university etc... and any funeral/IHT costs (£100k left for this)
- insurance policy 2 - 100% into trust for my daughter's future living costs/school fees/university etc..
- estate - mortgage and liabilities all paid off with the £220k, assets such as house, motorbike, car all passed 100% to my daughter with no outstanding associated debts or IHT liability as under the threshold. My will would then stipulate two family members to look after/assist until she is 18 as well as who I pass my parental responsibility/guardianship to (my mum, unless too old, then my daugher's godmother).
Does what I've outlined above achieve what I want?
My ex did once say to my daughter as a passing comment "Oh if your mum dies, then the house will be yours and I'll move back into that house with my new partner, children and you". And she was like "er no. That's not what mum or I would want". Cheeky s*d. So I also want my will/letter of wishes to somehow stipulate that this isn't going to happen either unless my daughter changes her mind and its absolutely what she wants - I don't want her to be in a position where she is pressured into that.
Outstanding mortgage of £200k on a £250k house and if I died right now, probably other liabilities of £20k once savings have been offset. So my estate is in an overall solvent position but under the IHT threshold before you take the life assurance into consideration. I wouldn't want the house to have to be sold to meet the outstanding mortgage or other liabilities. Equally I don't want the whole life insurance payouts to fall into my estate for IHT as they clearly exceed the £325k +£125k allowances.
So I'm trying to achieve:
- insurance policy 1 - 100% into trust, letter of wishes asks £220k paid to estate to pay off mortgage and meet other liabilities (does this work?), 10% paid to family member 1, 10% paid to family member 2, remainder held in trust for discretionary payments for my daughter's living costs/school fees/university etc... and any funeral/IHT costs (£100k left for this)
- insurance policy 2 - 100% into trust for my daughter's future living costs/school fees/university etc..
- estate - mortgage and liabilities all paid off with the £220k, assets such as house, motorbike, car all passed 100% to my daughter with no outstanding associated debts or IHT liability as under the threshold. My will would then stipulate two family members to look after/assist until she is 18 as well as who I pass my parental responsibility/guardianship to (my mum, unless too old, then my daugher's godmother).
Does what I've outlined above achieve what I want?
My ex did once say to my daughter as a passing comment "Oh if your mum dies, then the house will be yours and I'll move back into that house with my new partner, children and you". And she was like "er no. That's not what mum or I would want". Cheeky s*d. So I also want my will/letter of wishes to somehow stipulate that this isn't going to happen either unless my daughter changes her mind and its absolutely what she wants - I don't want her to be in a position where she is pressured into that.
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Comments
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1) One insurance is put in trust for your daughter. Sorted. Does the insurance company run the trust? I ask from ignorance. Anyway your lawyer should keep you right. Because it goes straight from insurer to trust, no IHT exposure.
2) The other insurance goes into your estate. Your will specifies that the house goes to your daughter and that the rest of your assets go as follows: funeral costs, chattels all to daughter, 10% paid to family member 1, 10% paid to family member 2, balance of money into a will trust for your daughter. Think hard who you want as the trustees: maybe your mother and your daughter's godmother. In your letter of wishes implore them not to appoint a solicitor or accountant as a co-trustee but, as trustees, to have the trust pay for legal and financial advice as they think fit.
About (2) The house and the rest of the estate together have IHT exemption for 18/19 of £125k plus £325k = £450k. That sounds to be just a bit tight: you expect to be dealing with £400k + chattels + (£250k - £220k) = £430k + chattels. It would have more slack in 19/20 unless house prices shot up.
Come to think of it, it's pretty similar to your proposal. People here often recommend that the lawyer you hire be a specialist in these matters.
https://www.step.org
It's probably a good idea. We used a jobbing solicitor for a trust matter and she made a howler.Free the dunston one next time too.0
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