When purchasing life insurance, there is one simple yet crucial tip that can save you thousands of pounds. Always ensure that your life insurance policy is “Written in Trust.” This may sound technical, but it’s an easy step to take and can have significant financial benefits.
Having your policy “Written in Trust” guarantees that in the event of a claim, the payout goes directly to the beneficiaries you have named on the policy, bypassing your legal estate.
This means the money is immediately accessible and avoids the delays associated with legal processes. Additionally, by keeping the money out of the estate, it prevents your solicitor from taking a cut.
The financial advantages extend further. In the UK, if the value of your taxable estate exceeds £275,000, it becomes subject to Inheritance Tax at a rate of 40% on the amount over the threshold. So, if the proceeds of your life policy go to your estate, the taxman gets his hands on a significant portion of it. However, having your policy “Written in Trust” ensures that the life insurance company pays out directly to the nominated beneficiaries, bypassing Inheritance Tax altogether.
This advice is applicable even if your life insurance policy is intended to pay off your mortgage. By having the policy written in trust and paid directly to your partner, he or she can use the funds to pay off the mortgage while avoiding any tax implications.
The best part? Most brokers provide the service of “Writing in Trust” free of charge. This means that not only are you saving thousands in potential taxes, but you’re also not incurring any additional fees for this essential safeguard. It’s a win-win situation that can make a significant impact on your financial future.
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