Life Insurance payout into a trust and Will ?

Life Insurance payout into a trust and Will ?

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PostHeads123

Original Poster:

1,042 posts

134 months

Thursday 16th June 2016
quotequote all
I became a dad a few months back and live with the mother we are not married and don't intend to marry. I'm lucky and own my house out-right and in my sole name but the inheritance tax if I left it to my partner / son would be large, I want them to be able to remain in the property so I want to make sure I leave enough cash to cover the inheritance tax due.

I was going to cover the inheritance tax via life insurance I get through work and I read that I can have this paid into trust so that money does not incur inheritance tax, does that sound correct ? I also read that life insurance companies tend to offer the 'put in trust' option when you take out the insurance but I get my from work so not given this option, I was told though I could have the beneficiary of my life insurance as the trust, this being the case I take it would be a solicitor who would set up the trust and generally how much would it cost we talking a few hundred or a few grand ? Also once the trust is setup does it have to yearly things like submit returns or anything ?

Finally is there any other way to leave my house to either my son or partner without them incurring the inheritance tax ? I refuse to marry just to avoid it.
cheers

Edited by PostHeads123 on Thursday 16th June 13:29


Edited by PostHeads123 on Thursday 16th June 13:30

megaphone

10,694 posts

250 months

Thursday 16th June 2016
quotequote all
What is the value of your estate if you died tomorrow?

PostHeads123

Original Poster:

1,042 posts

134 months

Thursday 16th June 2016
quotequote all
Above the higher rate IHT threshold

Edited by PostHeads123 on Thursday 16th June 15:43

Ginge R

4,761 posts

218 months

Thursday 16th June 2016
quotequote all
PostHeads123 said:
I became a dad a few months back and live with the mother we are not married and don't intend to marry. I'm lucky and own my house out-right and in my sole name but the inheritance tax if I left it to my partner / son would be large, I want them to be able to remain in the property so I want to make sure I leave enough cash to cover the inheritance tax due.

I was going to cover the inheritance tax via life insurance I get through work and I read that I can have this paid into trust so that money does not incur inheritance tax, does that sound correct ? I also read that life insurance companies tend to offer the 'put in trust' option when you take out the insurance but I get my from work so not given this option, I was told though I could have the beneficiary of my life insurance as the trust, this being the case I take it would be a solicitor who would set up the trust and generally how much would it cost we talking a few hundred or a few grand ? Also once the trust is setup does it have to yearly things like submit returns or anything ?

Finally is there any other way to leave my house to either my son or partner without them incurring the inheritance tax ? I refuse to marry just to avoid it.
cheers

Edited by PostHeads123 on Thursday 16th June 13:29


Edited by PostHeads123 on Thursday 16th June 13:30
A decent adviser will not charge for putting your cover into trust.

You have lots of options re your home - please, take advice. What's right for someone here, may not be right for you for a multitude of reasons.

PostHeads123

Original Poster:

1,042 posts

134 months

Thursday 16th June 2016
quotequote all
Ginge R said:
A decent adviser will not charge for putting your cover into trust.

You have lots of options re your home - please, take advice. What's right for someone here, may not be right for you for a multitude of reasons.
Thanks but who is best to go to for advice on this a financial advisor or solicitor ? I spoke to one solicitor so far and as soon as I explained my situation he couldn't offer help / advice, may be a cr*p solicitor.

thanks

Jockman

17,912 posts

159 months

Thursday 16th June 2016
quotequote all
PostHeads123 said:
Above the higher rate IHT threshold

Edited by PostHeads123 on Thursday 16th June 15:43
What higher IHT threshold?

Why would you refuse to marry if it would save them £100k?

PostHeads123

Original Poster:

1,042 posts

134 months

Thursday 16th June 2016
quotequote all
Jockman said:
What higher IHT threshold?

Why would you refuse to marry if it would save them £100k?
40% I thought that was higher rate but seems to be all 40% for all of it above the threshold.

I don't believe in marriage, never have, never will end of.

AndrewEH1

4,917 posts

152 months

Thursday 16th June 2016
quotequote all
PostHeads123 said:
I don't believe in marriage, never have, never will end of.
You seem to be in a serious relationship with this woman and have a child together. If you split up you'd have to pay her just as you would if you got divorced.

Just get married for a ~£200 at the local register office, the cheapest and easiest way to avoid tax should the worst happen.

PostHeads123

Original Poster:

1,042 posts

134 months

Thursday 16th June 2016
quotequote all
AndrewEH1 said:
You seem to be in a serious relationship with this woman and have a child together. If you split up you'd have to pay her just as you would if you got divorced.

Just get married for a ~£200 at the local register office, the cheapest and easiest way to avoid tax should the worst happen.
May be true but not the point I don't believe in marriage.

Ginge R

4,761 posts

218 months

Thursday 16th June 2016
quotequote all
PostHeads123 said:
Thanks but who is best to go to for advice on this a financial advisor or solicitor ? I spoke to one solicitor so far and as soon as I explained my situation he couldn't offer help / advice, may be a cr*p solicitor.

thanks
In the first instance, have a chat with a good IFA.

B0bman

49 posts

159 months

Thursday 16th June 2016
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PostHeads123 said:
May be true but not the point I don't believe in marriage.
Whether you believe in it or not, I can assure you that it does exist!! Ask my wife ;-p

TwigtheWonderkid

43,248 posts

149 months

Thursday 16th June 2016
quotequote all
PostHeads123 said:
I don't believe in marriage, never have, never will end of.
You don't have to believe in it! Do you believe in giving the taxman huge amounts of money, thus depriving your family of it, out of stubbornness? If not, get married.

As someone very wise once told me, it's not the principle, it's the money.

Ean218

1,959 posts

249 months

Friday 17th June 2016
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TwigtheWonderkid said:
You don't have to believe in it! Do you believe in giving the taxman huge amounts of money, thus depriving your family of it, out of stubbornness? If not, get married.

As someone very wise once told me, it's not the principle, it's the money.
That's almost tax evasion, participating in a contrived scheme purely to avoid tax.

I'm with the OP on this one, very similar circumstances.

sidicks

25,218 posts

220 months

Friday 17th June 2016
quotequote all
Ean218 said:
That's almost tax evasion, participating in a contrived scheme purely to avoid tax.

I'm with the OP on this one, very similar circumstances.
No it isn't.

Jockman

17,912 posts

159 months

Friday 17th June 2016
quotequote all
Ean218 said:
TwigtheWonderkid said:
You don't have to believe in it! Do you believe in giving the taxman huge amounts of money, thus depriving your family of it, out of stubbornness? If not, get married.

As someone very wise once told me, it's not the principle, it's the money.
That's almost tax evasion, participating in a contrived scheme purely to avoid tax.

I'm with the OP on this one, very similar circumstances.
Using evasion and avoid in the same sentence muddies the water. In what way does planning your affairs for IHT purposes afford any financial gain to the OP?

Ginge R

4,761 posts

218 months

Friday 17th June 2016
quotequote all
PostHeads123 said:
Finally is there any other way to leave my house to either my son or partner without them incurring the inheritance tax ? I refuse to marry just to avoid it.
cheers

Edited by PostHeads123 on Thursday 16th June 13:29


Edited by PostHeads123 on Thursday 16th June 13:30
How old are you? In principle, you can place you house into trust or a property company (both?), but there are numerous issues with this. Do it when you're too old and you run the risk of allegations of deprivation made against you, to avoid care costs and charges. You have to pay George Osborne a decent chunk upfront too, depending on the value now and when you bought it, and you also have to pay a fair amount of rent to either the new owners or the trust unless you want the house to be deemed a gift with the reservation of benefit.

Assets within a trust are exposed to periodical and exit charges. When an asset is placed within a discretionary trust, if over the personal allowance of £325,000, you have to pay George Osborne 20% of the value. The periodical charge is actioned on the tenth, and every tenth thereafter, anniversary. The sum could be up to 6% of the value of the asset (your home) over the IHT personal allowance.

If you gift the house, once a period of seven years has passed, it's deemed outside your estate. The worse case scenario though, is that you are kicked out of your own home; you are, after all, a tenant. You can take out insurance to cover the seven year period. The cover amount will taper down over the seven year period, mirroring the fall in IHT exposure. Those are the very simple options. One final point, you refer to your partner incurring IHT, is she wealthy in her own right, will this gift only add to her woes?

Your options are far more varied and complicated than that very simple overview, take your time and take advice.

TwigtheWonderkid

43,248 posts

149 months

Friday 17th June 2016
quotequote all
Ean218 said:
TwigtheWonderkid said:
You don't have to believe in it! Do you believe in giving the taxman huge amounts of money, thus depriving your family of it, out of stubbornness? If not, get married.

As someone very wise once told me, it's not the principle, it's the money.
That's almost tax evasion,
It can't be almost tax evasion. That's like being almost pregnant. It either is or it isn't, and in this case, it isn't.

Ean218

1,959 posts

249 months

Friday 17th June 2016
quotequote all
Jockman said:
Using evasion and avoid in the same sentence muddies the water. In what way does planning your affairs for IHT purposes afford any financial gain to the OP?
My assertion was slightly tongue in cheek and I'm not suggesting it is illegal, but it would certainly benefit his wife who would also be participating in the scheme.

As an aside, the revenue "simplistically" defines a tax evasion scheme as one involving artificial or contrived arrangements, which this would be if neither party actually wanted to marry.

TwigtheWonderkid

43,248 posts

149 months

Friday 17th June 2016
quotequote all
Ean218 said:
As an aside, the revenue "simplistically" defines a tax evasion scheme as one involving artificial or contrived arrangements, which this would be if neither party actually wanted to marry.
That's a worry, as I know quite a few couples that married purely to avoid IHT. Plus a same sex couple who entered into a civil partnership for the same reason.

Steve Campbell

2,110 posts

167 months

Monday 20th June 2016
quotequote all
Interesting comment OP....you don't believe in marriage? It's simply a legally recognised contract that gains you some advantages in what you are trying to do.

Don't get married = complex trust type arrangements and some likelihood of paying the tax man £££

Get married, problems solved for your partner & kid if you snuff it alone ?

I would reconsider, thinking of marriage as simply what it is for many these days, legal contract of relationship.

Get some independent financial advice on your current approach, then ask them "how would that be different if I was married ?". There may be other benefits linked to your pension / death in service or spouse pension etc.

the idea of IHT drives me nuts.....we work long and hard for our £££...in order to enjoy what we want to do in life, and provide for our children when we go if we are lucky enough to amass some wealth. The fact we pay income tax on all that, and then if successful the tax man comes and takes away again doesn't compute for me.

Edited by Steve Campbell on Monday 20th June 16:22