Can someone explain life assurance 'in trust' please?

[schmoz]

A colleague of mine just died suddenly at 41. Same age as me. With young children like me. Which made me realise that my partner and I really need to get in together and sort out what happens if the worst happens. We both get death-in-service of 4 times our salary which is why we haven't bothered with life insurance, but that would only pay off about 2/3 of the mortgage and wouldn't be enough for the other parent to stop or slow right down with work to look after the kids.

I've sort if got my head around what we need, but I don't really understand the 'in trust' bit. Would that mean I'd have to leave the money to the kids and my husband would essentially only be looking after the house until they're 21? Or could I leave him an income to look after the kids with or something. Not that I don't love them, but to me the natural order is he gets the money. Any advice would be really appreciated.

Life assurance policies are usually put in trust so that if you died the money would not come into your estate and be subject to inheritance tax. The policy is written into trust so that named beneficiaries in effect get the money free of inheritance tax.

I have such a policy.

If you are wealthy enough for your estate to be at risk of paying inheritance tax on death then you might wish to consider this. If you have children you may wish to pass the proceeds to them rather than DH/DP.

By the way, you absolutely must write Wills. If you are not married in particular. The passing of the estate to DP is not guaranteed.

I think you may well need to visit a good family solicitor - not a bucket shop will writing place. A good proper solicitor who knows about trusts and estates.

Thank you. But could DH be the named beneficiary? Or does it need to be a dependant/child?

I may well need to seek advice from a solicitor or financial advisor in the end I think. But I'm a bit loath to - I feel like I should be intelligent enough to work it out!

And I take your point about wills too. Rather pathetically we don't have them having been unable to agree who we'd ask to have the children if we both died!

schmoz - yes you can leave the proceeds to DP/DH or anyone else.

You DO need Wills. The thing about who looks after your children you put in a Letter of Wishes. Not usually in the Wills. Who looks after our children is a question we struggled with and never resolved but we do have Wills.

We have complex Will and Trust arrangements. I use a STEP solicitor. Use the search tool in that link to find a local one. They can be pricey but it depends what your total wealth is. If it is less than the £325,000 inheritance tax threshold you don't need complicated Wills and Trusts but still need a fairly experienced solicitor. Don't just go to a bank or Will writing service.

Thanks MoreBeta. Our wealth is pretty negligible to be honest, hence the need for some kind of life insurance - I hope DH would be left with enough money to spend time with our children rather than working 24/7.

I can't see our wills being very complicated ('you can have my record collection and pick up my half of the mortgage' kind of thing) but I've seen that people don't exactly act as you'd expect when someone dies so I know it's necessary.

Many thanks for the advice -I know I need to do some more research but it's been really useful. Thanks.