Hi lizs.

Some of the feedback from Mark, Kevin and Julie has suggested that it's likely that a Trustee would look for a life insurance policy to pay into a trust deed in the event that it paid out.
Some of the feedback has also suggested that in some circumstances the Trustee might have difficulties with this.

You may want to consider raising this with your trust deed company in connection to how they would handle your policy in the event it paid out.

You may also wish to speak with a financial adviser about this subject as it may be possible for the policy to be set up in a way that it could not be touched by the trust deed.
We're not going to be able to discuss that in much detail here I'm afraid because it might get close to the line of providing advice on life insurance which is a separately regulated area.

Hi lizs

The answer is yes. Even if it were assigned to the mortgage company, it would reduce the mortgage and the trustee could look for the equity after the reduction.

Mark

Sounds stupid, but what if the equity issue was addressed at the beginning of the trust deed, can it then be looked at again because of an unfortunate death?

Dont know about anyone else, but I know I couldnt afford my mortgage payment on my own, and neither could my husband if it was me that died, so seems pointless having the cover whilst in a trust deed because you would have to sell up because you couldnt afford mortgage anyway if the cover that was there for that purpose, ie to keep a roof over your head, ends up going to trust deed?

Appreciate that we are responsible for our debts, but we are also responsible for our childrens welfare and home.

Know its just a scenario, but it is a realistic scenario.

Hi lizs.

It's an interesting point. Hopefully one of the experts could explain how a life insurance payout to clear a mortgage would be dealt with where a home had been explicitly left out of a trust deed at the start if there were no equity.

In our particular situation, we have negative equity and thats noted on our trust deed paperwork. We also have it noted that no further valuation etc will be done at end of trust deed, hence equity situation dealt with at start, as all the experts here recommend.

Never want to be in the situation of anything happening to either of us, but with 2 children to think of, its something that not only myself but everyone needs to look into.

Would be interested in experts comments too!

Hi all

Life policies have no surrender value and therefore are not an asset. However in the event of death, the value attached to the policy crystallises and becomes an asset as it is then turned to cash. This is referred to as aquirenda. This cash would vest ( belong) to the Trustee.

The no or negative equity position is irrelevant as this is completely separate.

Rubbish comparison, but a lottery ticked on a Friday has no value, but after Saturdays draw.... who knows.

Mark

Totally understand where you are coming from Mark but the main purpose of the policy is to clear the mortgage so that the remaining partner is not financially burdened with the mortgage on their own. Seems to me that there is no point having any type of life insurance whilst you are in a trust deed.

I guess it depends on the size of your debts, lizs, as any remainder once your trust deed is paid off (debts plus interest plus trustee's costs and outlays) would be available to pay to your mortgage.

Would the policy payout be expected to be used to pay off both our trust deeds, or just the spouse of whoever dies, at the end of the day I'm not responsble for husbands trust deed and vice versa, so how would it work? Sounds a bit morbid, but we have 2 children to think of if anything happens?

Hi lizs.

I'd imagine it would pertain to the person that passed away.

The issue however is presumably that the other person would then receive a "windfall" in terms of cash, or increased equity if a chunk of the mortgage were repaid.

Dont see how it can get used to basically pay both trust deeds in effect. Its a joint policy so we are each others beneficiary effectively, so how can it get used in connection with the person thats passed aways trust deed?

On checking our policy it seems its a decreasing term assurance policy, decreasing in line with the mortgage, so even less money if anything happens to either of us during term of trust deed.

What would happen if we cancelled policy, what would happen in respect of trust deed if you die and you have no insurance?

If you were to die and have no insurance or other estate then your trust deed would be finished early and whatever had been gathered in would be shared amongst your creditors.