Husband A died in 2022.
Wife B died in 2023.
A was a policy owner/proposer of a life policy. B was the life assured on the policy.
A’s estate was not taxable but B’s estate is taxable.
I need to determine whether the value of the policy falls into A’s estate or B’s estate.
Please would anybody be able to assist.
A owned the policy; B was the life assured. B had no ownership rights.
On A’s death the value of the policy fell into A’s estate.
Following A’s death the policy continued in existence until B’s death (assuming B was the only life assured).
The value of the policy on A’s death depends on the type of policy. The life office can advise.
The policy will have ‘paid out’ on B’s death. You will need to identify the owner at that point.
Hello Gerry
Thank you for your response.
The company tell me that B became the new owner following the death of A.
Do you consider that means the value (£7,000) needs to go in both estates?
I assume B inherited the policy from A.
In my view the value of the policy will be an asset of both estates.
A owned the policy. It was an asset of his estate. However it’s value may have been minimal at the date of A’s death especially if it was a term policy. If A’s estate passed to B spouse exempt then there will be no IHT to pay in any event.
Was the policy assigned to B by A’s PRs prior to B’s death? If so then the policy and its death value of £7,000 would be an asset of B’s estate.
In the circumstances however I suspect the policy may not have been assigned to B by A’s PRs. In that case the policy itself was not an asset of B’s estate (the life office may have given you wrong advice in that regard). The value of the policy on B’s death will nevertheless be reflected in B’s estate because it is reflected in the value of A’s unadministered estate, and B’s interest in the unadministered estate is an asset of B’s estate.
Paul Davies
Clarke Willmott LLP
I agree that the policy was owned by A but if it was inherited by B then beneficially it is owned by B irrespective of any assignment.
Also, have you checked that the policy is not in trust (it probably isn’t having been initially written on a life of another basis but probably worth checking if you are not sure.
Hope this helps.
I am inclined to agree with Paul Davies, The original question implies the policy was actually written on a “Life of Another” basis, on which basis it would normally have ceased on A’s death as A was the intended lifetime beneficiary. As it was not cancelled, the proceeds fall into A’s estate and are treated as an increment to his estate to the extent of the value paid out plus any interest added by the insurance company.