I have a joint mortgage – what can I do if my partner dies?

Paying the mortgage can be yet another concern when dealing with the death of a partner. Photograph: Alamy

Q My wife and I jointly own the home we live in and we are concerned about what would happen in the event of one of us dying leaving the surviving partner with all of the financial responsibilities including payment of the mortgage.

We spoke to Legal & General and they said that the surviving partner would be able to stay in the property without fear of being evicted due to not being able to keep up with payments provided we create a flexible trust that would give us protection were this to happen. I’m not sure if I have understood this correctly.

A It sounds to me as if you either already have – or are about to put in place – a mortgage protection policy which is a form of life insurance designed to pay off your mortgage if either of you dies (assuming it is a joint policy) before the end of the mortgage term. Having this sort of cover in place means that, because the mortgage would be paid off on the death of one joint owner, the surviving joint owner wouldn’t need to worry about making mortgage payments any more.

The life insurance provides the protection, not the flexible trust. However, it is common practice for people to put life insurance policies into trust which is what your insurer seems to be suggesting that you do. The advantage of putting a life policy into a trust is that any payout doesn’t form part of your estate for inheritance tax purposes. Because of this, you don’t need to wait for probate for the policy proceeds to be paid out and so the surviving joint owner would be in a position to clear the mortgage debt quite quickly. But I am surprised that Legal & General is suggesting a flexible trust. On its website, it says that “if you want the life insurance money to go to the other person on your joint life insurance policy, you may want to consider a survivor’s discretionary trust as this means that any money from the life insurance will automatically go to the other person on your policy.”. So it may be a good idea to go back to your insurer to ask for clarification as to why they are suggesting that you put your life insurance policy into a flexible trust rather than a survivor’s discretionary trust.