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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

AIBU to not bother setting up a trust for my kids to avoid IHT on Life insurance?

17 replies

JustAboutInsured · 05/04/2025 08:03

Is it possible to set up a basic trust for my adult kids cheaply and quickly?

I only have about 18 months of a £400k life insurance policy left, but was just told the operation I am having next month has a 2% mortality rate.
If the worst happens, Ideally I'd want the cash to go to my kids without it being subject to IHT.
The trouble is, it sounds complicated and expensive to set up a trust and get the life insurance policyholder reassigned to the trust as beneficiary.
It looks like I'd have to get solicitors involved, which sounds expensive.

Can anyone tell me if this is worth doing, given the hassle, cost and limited time left on the policy? Also how long would it take, the operation is next month.

I'm happy enough paying IHT on the rest of my estate, so not really thinking of putting anything else into a trust

I'm sort of thinking that the chances of this happening are small, and paying some tax is not the end of the world

OP posts:
TheCountofMountingCrispBags · 05/04/2025 08:14

Make up your mind! Do you want to 'avoid' IHT or not? If you do, then spend a bit of time and money ensuring your kids' inheritance is protected. It does sound such a bloody faff though, doesn't it. A couple of hundred quid for advice, a few hours organising, all to save your children some money... Jeez, the stuff we have to do...
If you don't want to undertake this dreadfully onerous task, don't. If you are content that after IHT they will still be well off, save yourself the time and money that you seem not to want to invest.

Thoughtsonstuff · 05/04/2025 08:15

A life insurance policy is usually written in trust anyway? So it's outside your IHT estate.

ThisPinkBee · 05/04/2025 08:21

You need to ask a solicitor. Yes you do need a solicitor as it's complicated.

Original poster
JustAboutInsured · 05/04/2025 08:21

Thoughtsonstuff · 05/04/2025 08:15

A life insurance policy is usually written in trust anyway? So it's outside your IHT estate.

maybe nowadays, this one was over 20 years ago, and just pays the cash to me as the policyholder. It's not simply like with a SIPP pension, where you just change the beneficiary name

OP posts:
Rosecoffeecup · 05/04/2025 08:29

Your insurer should have forms that you can use for this - you shouldn't need a solicitor

Google thr insurer + protection trusts and see what they have available

Letstheriveranswer · 05/04/2025 08:31

Usually a life insurance company will just provide the forms to you and you get your chosen trustees to sign and send them back

However as I have found, they won't let you remove it from trust later on.

Thoughtsonstuff · 05/04/2025 08:33

Pays the cash directly into your estate on death? That's where the IHT becomes relevant. Or are you planning on cashing it in in your lifetime and are worrying about what to do with the resulting pot? If you are alive you won't need to pay IHT obviously.

If I were you and you are thinking of cashing it in and have the capital, I'd go to an IFA or investment manager and do some financial planning. See what you can give away in your lifetime to mitigate IHT.

But ideally you want to get it in trust if it isn't and you should get your insurance provider to sort that so it remains outside your IHT estate.

NOTANUM · 05/04/2025 08:34

This is not something I know anything about.
Why isn’t everyone doing it if it’s legal and costs only a few hundred quid? Is there some doubt over its legality?

TerrifiedPassenger · 05/04/2025 08:38

Life insurance pays out when you die. Usually direct to a beneficiary so is outside IHT.

You need to check with your insurer. Might be as simple as a quick form declaring your dc as beneficiaries.

Thoughtsonstuff · 05/04/2025 08:40

NOTANUM · 05/04/2025 08:34

This is not something I know anything about.
Why isn’t everyone doing it if it’s legal and costs only a few hundred quid? Is there some doubt over its legality?

Policies are almost always written in trust automatically these days. The OP says hers is old and isn't unfortunately.

Original poster
JustAboutInsured · 05/04/2025 08:50

Thoughtsonstuff · 05/04/2025 08:33

Pays the cash directly into your estate on death? That's where the IHT becomes relevant. Or are you planning on cashing it in in your lifetime and are worrying about what to do with the resulting pot? If you are alive you won't need to pay IHT obviously.

If I were you and you are thinking of cashing it in and have the capital, I'd go to an IFA or investment manager and do some financial planning. See what you can give away in your lifetime to mitigate IHT.

But ideally you want to get it in trust if it isn't and you should get your insurance provider to sort that so it remains outside your IHT estate.

Edited

it's not one I can cash in, it's just a plain Life insurance policy

OP posts:
Original poster
JustAboutInsured · 05/04/2025 08:51

Rosecoffeecup · 05/04/2025 08:29

Your insurer should have forms that you can use for this - you shouldn't need a solicitor

Google thr insurer + protection trusts and see what they have available

Edited

thanks for that, their form does look like it covers it:

https://static.aviva.io/content/dam/document-library/adviser/individualprotection/al53003c.pdf

https://static.aviva.io/content/dam/document-library/adviser/individualprotection/al53003c.pdf

OP posts:
Rosecoffeecup · 05/04/2025 09:57

Hope your surgery goes well

ohyouagain · 05/04/2025 16:43

Yes, just use the insurer’s forms, follow the instructions, then send it to them, they check it, stamp it and send the original or a copy back to you. Good luck!

Watermill · 05/04/2025 16:58

Really easy. I have a Legal and General policy that I set up a trust for. Consider trustees wisely, and age the benefits can be obtained.

One of my DC friends inherited a large amount via trust fund when he was 18. He’s now 25 and never worked. Money all gone.

Original poster
JustAboutInsured · 20/04/2025 12:23

I have set up the trust fund!

OP posts:
Rosecoffeecup · 20/04/2025 14:01

Glad it's sorted, hope the op goes well

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