Writing life assurance policy in trust

[MrsEricBana]

Am having a tax related worry and would appreciate some help please! My husband has just taken out 2 life assurance policies - I did all the sorting out and finally they went on risk on 29/11 and 7/12. We definitely want both of these to be written in trust so that in the awful event that a claim had to be made, the proceeds of the policy would go into the trust for the benefit of the children and not form part of his estate and hence potentially be subject to IHT. Here's the thing - the broker assured me that the trust forms could be done once the policies were on risk (so as not to waste time filling in the forms if we were to be turned down for the policies) but reading the small print in the trust form I am now concerned that the trust side of things should have been done BEFORE the policies went on risk (i.e. as they were set up not after the event when they are now classed as "existing policies"). Does anyone know if writing the policies in trust now (only days after they went on risk) affects the IHT position. Help! Any advice very gratefully received, thanks.

No idea but I need to know too

I am on the case! The insurance company says it is fine but I am still not convinced as I think putting an existing policy into trust might count as a chargeable lifetime event as far as IHT is concerned (which still might be ok as premiums would be lower than allowances I think). Someone from the Inheritance Tax and Probate Helpline (!) is phoning me back so will let you know what they say. Thanks for replying anyway!

MrsEB I am watching this thread with interest too, so do please let us know!

Ok, I have it cracked! The very lovely helpline man phoned and said that the reason it is most ideal to put the policy in trust when you set it up is that at that point no premiums have been paid and it has a clearly quantifiable value. He said some policies have a cash in value (ours doesn't) so if you put them into trust part way through their life you are deemed to be making a transfer that could potentially be liable for inheritance tax (based on the market value of the policy at the time you put it into trust). In our case the policies are level term policies and have no cash in value (and would only ever be worth anything if the insured person were to die), and the premiums are exempt from IHT as they are paid out of what the tax man calls "spare income" ie out of our monthly salaries (vs giving a relative say £10k from your savings as a gift, which is not exempt from IHT if you die in the next 7 years). So, in our case it is ok to get the policies written in trust now, but would be better to do it when you first take out the policy if that policy had any market value at any point (like those ones that pay back part of your total premium paid if you don't die by the end of the term). It's a minefield really. Don't even get me started on pensions.

Thanks! I'm ok too, just need to actually do the trust thing which is more complicsated(3 kids/2 differrnt dads)