What happens to house when I die (trying to work out my will)

[fallenninjastrikesback]

I own a house. The mortgage is £320k. Its current value is about £350k. I have life insurace to pay off the mortgage if I die but currently this is left in trust to a family member not actually to the mortage IFSWIM?

However how does it work? If I drop dead tomorrow, what happens to the mortage payments, are they frozen? do they keep adding on? Do I need to allocate the life insurace to pay off the mortage and then does it happen straight away and then my house is the estate rather than just the equity with the life insurance fund being controlled by the family member?

If the moneys gone to my mum, can she buy the house from the mortage company, but I assume then she pays market value, rather than just clear the mortage?

I need to sort my will, but it all seems really confusing!

You are not the owner of the life policy. You'll have to start up a new one, and make yourself the beneficiary of it if you want to ensure the mortgage is repaid on death.

Thanks Collaborate

So if I set up a new life insurance, or change the receipient of one of the current ones to myself, then it would automatically pay off the mortgage, or do I need to specify thats what its for?

Then I assume, when my estate went through probate, the house would be paid off, and thus could be left in trust to the children?

It would fall into your estate on death. Mortgage lenders used to insist on policies being assigned to them, but no longer adopt this practice.

You no longer own a policy that you have assigned to another. It follows from that that you can't simply assign it back to you, or to anyone else.

If it is paid into your estate it may be liable for inheritance tax. If it goes direct to the 3rd party owner it won't attract IHT.

Right brillant thanks.

How just need to find someone to write my will.

OP, I have an advert over on classifieds if you're interested (5* Will Writing Service Recommended by Mumsnetters).

As Collaborate says, normally life insurance policies are excluded from the estate in order to avoid IHT being applied. This occurs because the Trustees of the policy have discretion as to where the money goes.

The same applies to any death in service benefits.