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Lester Aldridge and the benefits of life insurance for peace of mind

 Peace of mind involves a multiplicity of elements 

One is how well you provide for your loved ones in the event of your death 

This latest article in the Life Matters series focuses on how you can include more security in your estate by incorporating a life insurance policy. And then, by considering the potential advantages of writing the policy in trust as well.

What is a life insurance policy?

Life InsuranceLife insurance is a financial product that will pay a lump sum if you were to pass away within the policy term. Having a life policy in place can help give your loved ones peace of mind that if anything happened to you, there will be a pot of money to help pay the bills, any outstanding mortgage or help maintain a standard of living.

Do I need life insurance?

This is a personal decision and is very much dependent upon your circumstances. A financial adviser would be able to discuss your position and advise you of the policy options available.

I encourage clients to consider what would happen if they were to pass away without a policy in place. For example:

  • Can your surviving partner and family afford any outstanding mortgage?
  • Can your surviving partner and family maintain their standard of living?
  • Will your estate be subject to a substantial Inheritance Tax liability?

Who will benefit from the policy proceeds?

It is always worth checking with the policy provider what will happen to the policy proceeds after you have passed away.

It may be that the policy is paid to your estate. The policy will therefore be an asset of your estate to be subject to Inheritance Tax and the proceeds will pass to the beneficiaries named in your Will.

Alternatively, the policy can be written in trust. This is a legal arrangement that will take the policy outside of your estate for Inheritance Tax purposes. Many policy providers will have standard trust deeds that can be completed. You can name the people you want to benefit and to what extent. In some cases, your intended beneficiaries will be the same beneficiaries as in your Will.

Should my policy be written in trust?

I look at my clients’ circumstances on a case by case basis. Usually, I would recommend that my clients consider writing their policy in trust. Not only does this have substantial Inheritance Tax advantages but it often means that your intended beneficiaries can access the policy proceeds sooner than if they were paid to the estate because a grant of probate is not then required.

Should I use the insurance provider’s standard documents?

Again, this is something that I consider on a case by case basis. In some situations the standard documents are perfectly sufficient. It is a cheaper and simpler option and many clients are able to complete the paperwork themselves without professional involvement.

However, in some cases, I would recommend that clients have a bespoke trust policy.

Many clients will consider what would happen on their death but, for estate planning to be effective, you have to look beyond this and consider the wider family circumstances.

For example, many people would want their spouse or partner to benefit from the policy. However, you need to consider whether increasing the survivor’s estate with the value of the policy is just going to increase the Inheritance Tax liability when they pass away.

Setting up a bespoke trust

Parisa JonesTrust documents are put in place so that when you pass away, the policy proceeds are paid to the trust and not to your named beneficiaries. With a well-planned and managed trust, your intended beneficiaries are able to benefit from the policy proceeds but with the advantage of the proceeds not forming part of their estate to then be taxed on their death.

If you want to look at putting a bespoke trust in place, it is important to ensure that you receive legal advice about this, especially to ensure that there are no unintended consequences.

At Lester Aldridge, we are able to advise you on setting up bespoke trusts and the legal, practical and tax implications of this.

Parisa Jones, Senior Associate

01202 786267

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www.lesteraldridge.com

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If following last month's article about funding care you would like to discuss this subject, please contact the Community Care team on 02380 827483, or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. We offer a free initial consultation by telephone or Zoom and run a weekly legal advice clinic between 4-5pm every Tuesday where no prior appointment is required.

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Life Matters from Lester Aldridge Solicitors - logoLester Aldridge Solicitors are based in London, Southampton and Bournemouth - where the office covering the New Forest is situated conveniently close to the main Bournemouth train station. Their specialist teams in the various fields of law will be happy to advise and assist you, starting with a completely free initial consultation during which you can decide whether you feel able to trust them with your confidential information.  For more information please click here. Consultations are also available via virtual meetings : advice is available through phone, email, Skype and Zoom.

Life Matters: Lester Aldridge Solicitors on a wide range of legal matters

Life Matters is a regular monthly feature on Lymington.com, which covers a wide range of legal subjects and is always written by one of the Lester Aldridge team. You can see a list of all published articles by clicking to the Lester Aldridge Solicitors webpage on Lymington.com here.

Other Life Matters Articles by Lester Aldridge - click here

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