Mrs Fiddler is a widow with 3 grown up children Tom, Dick & Harriet.
She wasn't yet aware of her illigitimate beneficiary Alistair.

Mrs Fiddler's home is worth £325,000 which by coincidence is the same as the IHT threshold under which she would pay no Inheritance Tax.

Her insurance policies paid out when Mr Fiddler died and she used it all to pay off their debts.

Whilst browsing the internet for a new merecat, she inadvertently mistyped the website address and discovered a comparison website that dealt in life insurance.
She had thought this was fate (and it was. . . ill fate) and went about setting up an insurance policy which would  pay out £600,000, which she had thought would leave each of her 3 children with £200,000 each.

Alas if her impoverished former IFA hadn't closed down his practise during the recession he would have informed her of the insidious Alistair.

Unfortunately didn't give any advice to Mrs Fiddler and she was responsible for any mistakes she made herself, even though she would have paid no more to have professional advice from a commission based IFA. She therefore made the mistake of not setting up the benefits of her insurance policy into trust.

Hence if Mrs Fiddler were to die she would pay 40% of her policy benefits to her illigitimate beneficiary, Alistair by way of Inheritance Tax. I'm sure that Darling wouldn't be the first name that crossed the minds of Tom, Dick & Harriet.

Beneficiaries of Mrs Fiddler's Life Policytaken out with Bright Pay Ltd.

Alistair Darling    40%    £240,000
Tom Fiddler        20%    £120,000
Dick Fiddler        20%    £120,000
Harriet Fiddler    20%    £120,000

Once again Alistair gets the Lion's share of money from the ill-advised, inheriting twice as much as any of Mrs Fiddler's legitimate children.

Moral of the story is ensure the insurer's commission is paid to a professional, who is responsible for the advice provided.
Had Mrs Fiddler's Insurance policy been set up in trust the £600,000 benefit would have escaped the clutches of the taxman as it would be considered outside of her estate. Therefore  her children would have recieved 40% more totalling £240,000.

by Mark Green
Green Gem Financial Limited

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