I would welcome comments on what people think about the figure to use on an IHT400 account for a Life Policy or Investment Bond. Many Life Insurance companies (e.g. Zurich) give 2 figures in the initial letter after death; one figure usually expressed as the “date of death” and one as “claim value”. The claim value figure is usually higher than the date of death figure.
Other companies go further and give a figure “as at the date of death and for probate and inheritance tax purposes”. However, the 2nd claim value figure is usually higher again.
I have been informed by financial advisors that the higher figure should be used for the IHT400 as this correlates with s171 IHTA 1984 and the HMRC IHT manual.
I always use the lowest figure compatible with the assurance company’s letter for IHT (assuming I wish to minimise IHT), but if I wish to maximise the IHT figure (which does happen sometimes) I use
the highest figure compatible with their letter.
I think the correct figure is the date of death figure. The claim value is based on the value of the investments held in the bond at the date the company is notified of the death, when (assuming
it is a single-life bond) the assets are (at least notionally) sold in the market. The claim value can easily be less than the probate value, depending on the time-lag and market movements in the meantime
Surely the ‘date of death value’ is the appropriate value for IHT purposes. Isn’t the ‘claim value’ (which can be higher or lower) typically the value at the date the company is notified of the death?
The claim value is typically 101% of the unit value at date of death and in some cases as much as 250%. Under s171 IHTA you must take into account the change in value that has occurred by reason of the death and therefore this value should always be used.