Joint Life Insurance Policy

Man and wife are divorced. Man has died and the ex wife has encashed the life insurance policy. Am I correct in thinking that this does not form part of the estate of the ex wife . If it did they the insurance company would have wanted to see probate . It is not written in trust and they have not asked for a copy of the will.

Collette Hodkinson

CPH Solicitors

It is perfectly possible that the policy was not comprised in the estate of the ex-husband (wife was the sole grantee on the policy) or that probate was not required on the ex-husband’s estate (joint grantees). However, if there was no trust and the “wife has encashed the policy”, I would have thought that the proceeds must have entered her taxable estate.

Paul Storrie
Storrie & Company

If it was taken out as a joint lives policy it would almost certainly have been held by them jointly, unless specifically assigned to one or the other as part of the divorce settlement.

Tim Gibbons

I assume you mean ‘does not form part of the estate of the ex-husband’?

If this is a joint lives, first death policy and was untouched by the financial arrangements following divorce, then the proceeds do belong to the ex-wife and all she has to do is to show a death certificate to receive those proceeds.

It is not common for a trust to be put in place for these joint lives policies unless both spouses die in short order (usually within 30 days).

Jill MacMahon
Thackray Williams LLP

You will need to determine how the policy has been written and its terms and conditions. Even though it’s a joint life policy, it doesn’t necessarily follow that there are also joint policyholders. Similarly, the absence of a request for probate or a copy of the will may not tell you a great deal. Some insurers are more insistent than others, and most would deal with a claim for £10,000 rather differently from the procedures and evidence required for a £10m claim.

Paul Thompson

Canada Life

If it was held jointly, which seems likely, half the value should go in the husband’s estate for iht, and if there is any iht on it, that will be payable by the ex wife.

Simon Northcott

The point appears to have been made that the nature of the risk insured against and the ownership of the policy are separate issues. However no-one appears to have asked who has been paying the premiums since the divorce or beforehand for that matter.

Ian McKeever

Ian McKeever & Co Consulting Actuaries

How often must this happen and yet still no clarity on the answer. I think Ian’s point is very relevant, as well as many of the others made. Surely, who was paying the premiums, and when the policy was acquired is relevant. If ex-wife had died first, then would it have escaped her estate completely? I would tend to agree with Simon’s analysis in that it is 50:50, unless there is documentation to the contrary (ie divorce/trust paperwork).

Haroon Rashid
I Will Solicitors Ltd

Could the ‘beneficial joint tenancy’ in the policy have been severed by conduct? Or might there have been some other agreement reached?

I understand that divorce does not, in itself, always sever a joint tenancy, but perhaps the intention to sever could have been inferred from/implied by the couple getting divorced. Maybe the divorce settlement even contains provisions regarding the policy (including who should pay the premiums).

In the absence of anything in writing, was there some oral agreement between the parties as to the payment of the premiums and entitlement to the proceeds?

It would be an unusual situation where A and B have taken out a ‘joint life first death’ policy, only A pays the premiums, but then A insists that the entire policy belongs to him, regardless of who dies first.

If the premiums were paid by A and B jointly, was the intention, following the divorce, really that the survivor should take all? It seems more likely that, if the policy was not referred to in the divorce settlement, they never even considered it. If they had and if the intention was that if one (say, A) died then A’s estate should receive half of the proceeds and B receive the other half (which, I have to say, I have never seen), then their solicitors would have advised them to settle the policy on trust, with independent trustees, so that your very situation would not arise.

I would want to find out if there was any correspondence exchanged between the parties about this or joint property generally, or any express agreed intention or any thought having been given to it at all. I would also check the divorce settlement for reference to this policy or joint property generally.

Paul Davidoff
Bircham Dyson Bell LLP

It is likely that there was very little value in the plan from an investment perspective. Do you mean that she has made a claim on it if it was written on a first death basis?

She would be able to do this merely on proof of death if she was the sole surviving owner.

Given the proceeds would be payable to her - I can’t see how it could form part of the deceased’s estate.

Kate Davenport
Robertson Baxter