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Summary Not enough people realise that they need to get their life insurance policy "Written in Trust". This article explains why it is so beneficial. Life Insurance - why your policy should be written in trust
One of the UK's biggest life insurance companies recently pointed out that
By having your policy "Written in Trust", it means that if a claim is made, the beneficiaries named on the policy receive the payout directly. If you're not in the know, then you could be forgiven for not understanding the significance of this. The life insurance companies, however, should know better. If the life insurance policy is "Written in Trust", the payout in ( car insurance cover ) the event of a claim will not be subject to inheritance tax because it never becomes part of your legal estate. The following figures explain how it works. Mr Smith's wife died a few years ago, so he wants his two sons to inherit his estate. He owns his home which has a current market value of £245,000, with £10,000 still left to pay on the mortgage. He also has stocks and shares amounting to £52,000, and his car and ( home insurance ) other belongings add another £18,000 to his value. Mr Smith has life insurance policy for £100,000 but he did not have the policy written in trust. We are working on the assumption that it would cost £5,000 to administer his estate and to obtain probate. If Mr Smith died tomorrow, he would leave a total of £400,000 for his sons, however that would be subject to inheritance tax. The value of his estate that goes above £275,000 would attract a tax charge of 40%, so all in all £50,000 would be taken away for tax, and each son would inherit £175,000. |
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