| Introduction | | | | protecting your mortgage, the policy will payout |
| Most life insurance companies in the UK offer a | | | | proceeds to cover the remaining balance of the |
| free service for placing your life cover into trust. | | | | mortgage on death of the first life. The proceeds |
| This article explains why you should seriously | | | | will be paid to the remaining spouse. However |
| consider doing so, and why seeking independent | | | | should something happen to both lives the |
| advice can ensure you have secured the welfare | | | | proceeds will be paid in accordance with the |
| of your family. | | | | estate, and a beneficiary may not be willing to |
| What is a trust? | | | | settle the mortgage/loan debt, the estate may |
| A trust is a way of making a gift, whilst | | | | not have a 'last will and testament' and rules of |
| maintaining some control over who benefits from | | | | intestate may apply causing delays, and the policy |
| it and when it becomes available. Rather than the | | | | proceeds are split amongst the relatives of the |
| gift being passed directly to the intended | | | | deceased. |
| beneficiaries, it is transferred to and held by | | | | You have taken a level term assurance policy |
| people known as trustees. The gift can be | | | | protecting your family of common law husband |
| anything from a house to a life insurance policy. | | | | wife and two children. You have a 'last will and |
| For the purpose of this article we will only | | | | testament' in place but the policy plus estate are |
| consider life insurance policies or combined life and | | | | over the inheritance tax threshold. The estate will |
| critical illness policies. | | | | require an investigation looking at assets, debts, |
| What is required to form a trust? | | | | gifts within the last 7 years. Forms will need to be |
| There are four key parts to a trust: - | | | | completed including PA1, IHT400 and IHT410 since |
| | | | the estate + policy is over the threshold. The |
| 1. Settler - Customer or owner of the life | | | | Inheritance tax will bill will need to be paid first as |
| insurance policy. | | | | the policy proceeds can not be accessed yet, this |
| 2. Trust Form - The legal document which | | | | could force sale of asset or a loan to be taken. A |
| formulates the trust. | | | | probate interview and payment of £90 will be |
| 3. Trustees - Key individuals appointed to by the | | | | required prior to grant of representation issued all |
| settler as trustworthy to ensure the settlers | | | | before the proceeds paid to spouse as the |
| wishes are acted upon. | | | | representative. If there was no 'last will and |
| 4. Beneficiaries - The individual(s) who will benefit | | | | testament' in place the remaining spouse could not |
| from any proceeds. | | | | have applied for letters of administration or |
| A trust form may also require a witness to | | | | received any part of the estate including the life |
| counter sign each of the sections. | | | | policy proceeds and will need to make a claim for |
| Why use a trust? | | | | a share of the deceased estate under the |
| If you already have a life insurance policy then | | | | Inheritance (provision for family and dependents) |
| you have already considered that your loved ones | | | | Act 1975 obviously this will incur legal costs. |
| dependents are looked after should the worst | | | | There are many more scenarios than the two |
| happen to you. However, it is worth considering | | | | outlined above and independent advice is |
| following two scenarios: - | | | | recommended to ensure you have your life policy |
| Yourself and spouse have a joint life policy | | | | setup correctly. |