Life Assurance and trusts - which one to choose

[fulltimemum]

I understand that if you have life assurance you can have it placed in trust such that when the person for whom the life assurance is taken out dies, the funds received are not included as part of the estate for IHT. I have contacted my life assurance company and said that I would like to do this. They have asked which type of trust I would like to set up. The choices that they have given me are "The flexible power of appointment trust" or the "self select trust". The life assurance is for both me and my husband and is paid out on first death and does not include critical illness etc. The idea is that if one of us was to die first then the other would receive the funds and do with it as they see best. From what I haver ead it would appear that with the first choice (flexible power of attorney) that as an applicant for the policy I or my husband could not have access to any policy proceeds. Any advice gratefully received.

Many thanks

[Arnold Aaron]

Normally on a joint policy such as this, the proceeds are automatically paid out to the survivor, and if this is the case the policy should not be placed in Trust.

Arnold Aaron.

www.arnoldaaron.co.uk

[fulltimemum]

The point of placing the policy in trust is that the proceeds on first death are not then included with the value of the estate for inheritance tax purposes and thus gives rise to a large tax saving.

[Arnold Aaron]

Can't have it both ways I'm afraid. If you want to benefit, then you have to accept the proceeds will form part of the estate for IHT purposes.

If you want to avoid the IHT liability, then placing the policy in Trust is best course of action, but then you can't benefit.

If you opt for the former, you would then seek IHt planning advice at the time.