A client’s will leaves their estate as to 10% each to two named grandchildren and 40% to the two surviving children of the deceased.
There is a life policy which falls into the estate of the deceased - the executor needs to sign to release the policy proceeds - the lives assured are the two survivng children only. Is this policy treated differently or are the proceeds once received treated the same as the other assets passing under the Will?
For the life policy to fall into the IHT estate of the deceased requires that the deceased was beneficially entitled to the policy (or treated as such). The deceased does not appear to be the life insured; the lives insured being the deceased’s two surviving children.
On the basis of the above, as neither of the insureds’ have died I’m unclear as to why there are any proceeds payable to the deceased’s estate (unless the executors surrender the policy).
Malcolm Finney
Thank you - the company has asked for the executors to sign the withdrawal form and also to have sight of the grant of probate. They also advised initially that the policy fell into the deceased’s estate. Maybe I should check if it was a joint lives policy. It is only in this last piece of correspondence that the joint lives assured being the two children has been mentioned. There is a second policy which clearly showed the deceased as the sole policy holder. I never had sight of the original policy as I believed they both belonged to the deceased outright aand both fell into her estate for IHT purposes.
Kind regards,
Claire Flood.
Hi Claire
If the provider have asked for the grant of probate I assume that the sole owner of the policy was the deceased. This means that whilst there is no death benefit payable (as the lives assured are still alive) ownership passes to the deceased’s PRs and goes in accordance with the will. The value of the policy at the date of death will also need to be included in the deceased’s IHT calculation. Once probate has been received then the PRs can potentially transfer ownership out of the estate to the lives assured.
Kim Jarvis
Thank you.
Kind regards,
Claire Flood.
Are you sure it is a term or whole life policy, and not an investment bond (single premium life policy)? A bond would be in the estate for IHT but if there are still lives assured then the policy will not pay out. If the executors are being asked to sign a withdrawal form that sounds more like a bond. You would need to be careful about withdrawing funds from it as the tax on investment bonds is complex particularly for personal representatives and trustees.
Thank you - it does say to refer it to an IFA (there is one in this matter so I will refer).
Kind regards,
Claire Flood.
That’s best, gains on non-qualifying life policies are taxed as income so it’s best not to surrender it if you can help it, unless the funds are needed immediately. If the policy needs to be distributed between beneficiaries you can usually assign segments to individuals, depending on the age and structure of the bond and the provider’s requirements.
Thank you - all these different investments are a bit of a minefield.
Kind regards,
Claire Flood.