An unmarried couple with two young children faced a diagnosis that left Jordan vulnerable, and £1.5 million of life cover sitting inside the estate. They married first, then had emergency wills and life insurance trusts drafted and signed within seven days. The tax saved was £120,000, for a fee of £6,000.
Names and personal details have been changed. The situation and the figures are real.
The situation
Jordan was thirty-five and had been diagnosed with a condition that left him vulnerable and would affect his capacity over time. He and Judith were not married. They had two young children and a combined estate of £1.9 million, most of it in life cover.
Lasting powers of attorney were already in place, which was fortunate. The life policies were not in trust.
What we found
- Being unmarried was costing them. Nothing passed between them free of inheritance tax, and neither could use the other's allowances.
- The life cover was in the wrong place. Because the policies were not in trust, £1.5 million of cover sat inside the estate and would be taxed with everything else.
- Time was the real constraint. Jordan still had the capacity to make a will, but nobody could say for how long. Everything depended on acting while he could still sign.
What we recommended
- Marriage first, which brought the spouse exemption and the combined allowances into play.
- Emergency wills and life insurance trusts, drafted and signed within seven days.
- Trusts drafted with vulnerable person provisions for Jordan, so the tax treatment follows him as an individual rather than the heavier regime that applies to most trusts. That also meant money could be paid in during his lifetime without an immediate charge, and the funds could still be reached for Judith and the children straight away.
The numbers
| Combined estate | £1.9 million |
|---|---|
| Life cover moved outside the estate | £1.5 million |
| Inheritance tax saved | £120,000 |
The immediate lifetime charge that would otherwise have arisen on the trusts was avoided. With Judith in her thirties, the planning is now aimed at the second death rather than the first.
What it cost
| Wills and life insurance trusts, within seven days | £6,000 |
|---|---|
| As a share of the estate | 0.32% |
Current figures are on the guide prices page.
The takeaway
The first step here was not a document. It was a marriage, because that changed which rules applied before anything was drafted. And the case only worked because it was done while Jordan could still sign. Capacity does not wait for a convenient moment.
If someone in your family has had a diagnosis, or you have life cover that has never been put in trust, book a free twenty minute call.
This case study is illustrative. The figures are those of the matter at the time and the rules then in force; the fees are what was charged then, not current guide prices. It is not a guarantee of any outcome, and your own position depends on your circumstances. More case studies.
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