Mortgage Protection Insurance and Tax

I have a Mortgage and when setting it up the Bank did not require Mortgage Protection Insurance. However I took out a Life Policy of equivalent value.
It is currently payable to my partner on my death. The idea being she would use it to pay off the Mortgage.

Problem is, as my Partner, she has little tax relief on anything she inherits from me. The taxman might take more than half the insurance money from her, which would leave her unable to clear the mortgage.

An alternative might be to 'assign' the life policy to the lender, so in event of my death the cash would go directly to the bank.

Question is - would that improve matters? Would the payout still be taxed at the same rate? Would the bank still be left with a shortfall, and then come looking for the balance?
Are Mortgage Protection Policies written in a different way from Life Policies? Do the have tax exemption or what?

A very interesting point which I have not heard raised before.

If the money goes to the lender, then your partner is not involved.

She inherits the house, mortgage free.

If she has lived in the house for 6 years on your death, then she will get it free of CAT.

Brendan

Right Brendan, so it sounds like the Banks have better 'inheritance' entitlements than our beloved life partners. How bizarre. But not unexpected.

She will not be living there, because it's an investment property, hence the lack of compulsion to get a Mortgage Protection policy from the outset.

Since she would be hit for the CAT on inheriting the house it sounds like its exactly the same end effect - a big tax bill for her.

So maybe we should just get married.

What do gays do? No such option for them.

They have civil partnership, where have you been?

The Far East.
Is Civil Partnership available to hetero couples?
Does Civil Partnership grant full tax benefits like a married couple?