Life Insurance and Trust question - advice please.

[littlerach]

Dh and I are reviewing our life insurance and one of th equotes that we received has asked us if we would like to have the option to have it placed in a trust.
Do we??!
If so, is this usaual?
Do we need a solicitor?

Many thansk.

Hi Littlerach - I'm not a solicitor or anyway legally qualified, so I can only offer MHO - but, from my experience, it is fairly normal to discuss the option of putting it in a trust. The reason being, if the worst happens, and your little ones are really young - then you don't want them having access to everything immediately. If you put it in trust (and you can select someone to have control of that trust for you if you wish), and then transfer the contents over once your little one/s hit a set age. As far as I know, you don't need a solicitor, however, I would recommend you speak to whoever organised your will - and see what they say. (If you don't have a will yet - then speak to someone who can do the whole lot in one go - it's not that expensive, and they seem to know what they are doing). Hope it helps.

I think they might be talking about something less complicated than that.

Payments for life insurance are often written in trust because it means that the payments can be made tax free (or largely tax free?). If the payments belong to the insured, then they form part of the estate for inheritance tax. If they are in trust, then they are for the beneficiaries so don't go into the inheritence tax pot.

It does not change who you can leave the money to (i.e. it can be DH) and is quite straightforward.

I am not a tax expert or anything but TBH I thought all policies were set up in trust. My one at work certainly is.

Thanks for replies.
i htink it is to do with tax.
So it is normal then. Our current policy isn't st up like htis. Hmm.

Now I get what you mean a bit more ! Sorry - I was on a different wave length. Your old one may not have been set up like that due to value. There are different recommendation based on the value of your policy (e.g. I know in terms of inheritance tax that there is a tax loophole if your 'estate' is worth more than £350k)

And even if your estate is not now, it is often worth doing it because (a) if you are the second of a married couple to die and have inherited your husband's part already, it might push you over the top; (b) you never know what will happen to property prices, tax rules and tax thesholds in the (hopefully very long) time before you die ; and (c) if changes are made, you often get to keep the benefit if your arrangments were in place already

The main point of putting a life policy into trust would be to put any money recieved from a payout outside of an inheritance tax liabilty (IHT). (If your estate is more than £300,000 on death anything above is liable to the tax man at 40%)
The payment into the life assurance does not recieve any tax advantages, only the potential payout.
You ideally need to review your estates worth and see if there is an IHT liability over £300,000, if so see a solicitor and look at using trusts with life assurance to negate the IHT liabilty.
You can also use a trust if you wish to leave the money to a particular person (Say, instead of your spouse) who the money would pass over to automatically.