Life Insurance - Probate

[elkay]

Following the failure to get a will done (ref thread viewtopic.php?f=2&t=40217), I am now going through the tasks for the elderly siblings, in preparation for application for Letters of Administration.

I have been pleasantly surprised in that most the instituitions involved have been accommodating with me acting on their behalf, and have been making good progress. There are 12 life policies across about 6 different companies. The only life insurance policy documents I could find are related to a policy that was cancelled... therefore I don't know any details of the policies, and am dependent on the companies providing the information

I'm starting from the assumption that life insurance that is not in a trust will form part of the estate for IHT purposes, unless the insurance company tells me otherwise.

I have now received a claim form for the Scottish Widows, which states in different places that my wife was named as beneficiary, and that the policy proceeds are not part of the estate. However, there is also a statement "Please be advised that if Grant of Probate is being applied for, we will need sight of this for settlement along with the enclosed Claim Form completed by the named personal representative(s) on this document".

1. Why would they need to see sight of the Probate if the proceeds are excluded from the estate? Do the proceeds of the trust still need to be included in the assets of the estate, even though they are excluded from IHT? The gov.uk doesn't go into this detail.

2. The form is to be completed by the claimant (my wife), who is not the personal representative of the deceased. Or am I missing something?

It's not the first form I've completed where the instructions are poor or even contradictory.

TIA
elkay

[DrFfybes]

I have now received a claim form for the Scottish Widows, which states in different places that my wife was named as beneficiary, and that the policy proceeds are not part of the estate. However, there is also a statement "Please be advised that if Grant of Probate is being applied for, we will need sight of this for settlement along with the enclosed Claim Form completed by the named personal representative(s) on this document".

1. Why would they need to see sight of the Probate if the proceeds are excluded from the estate? Do the proceeds of the trust still need to be included in the assets of the estate, even though they are excluded from IHT? The gov.uk doesn't go into this detail.

2. The form is to be completed by the claimant (my wife), who is not the personal representative of the deceased. Or am I missing something?

We had one with MrsF's parents. IIRC the form was simply filled in by the recipients and sent off before Probate was granted as it was outside the Estate. Not sure if it went on the IHT form anywhere.

As you aren't applying for Probate, there is no Grant to submit.

FWIW SW is now part of Halifax/Lloyds, and when they doubtless ask your wife to prove her ID you can usually pop into a branch and do it. Hx were OK with it, Lloyds denied it was anything to do with them, then sent us £80 when we complained

It's not the first form I've completed where the instructions are poor or even contradictory.

It won't be the last either

Good luck

Paul

[gryffron]

I'm starting from the assumption that life insurance that is not in a trust will form part of the estate for IHT purposes, unless the insurance company tells me otherwise.

Typically life insurance payouts are direct to the benficiary. And thus not included in the estate or for IHT. They are deliberately arranged this way precisely to avoid IHT. Not always true, and it does depend on the wording of the policy, but this is the most common arrangement.

As you aren't applying for Probate, there is no Grant to submit.

"Grant" is often used to mean either Probate or Administration. Though I accept in this case the OP explicitly said Probate. I'm going to use this term in a moment so I'm explaining not to be critical of you, but for elkay's benefit.

1. Why would they need to see sight of the Probate if the proceeds are excluded from the estate?
2. The form is to be completed by the claimant (my wife), who is not the personal representative of the deceased. Or am I missing something?

1. I think they are confused by the fact that they are dealing with you (Executor/Administrator) rather than the beneficiary. If YOU were making the claim, you'd need the Grant to prove you have the right to act. Your wife, as beneficiary, should not. I suggest your wife simply writes that there is no will/probate in the notes on the claim form.
2. As I said, typically life insurance goes direct to the beneficiary, so I would expect the beneficiary to have to submit the claim form, not the executor/administrator.

Gryff

[elkay]

As you aren't applying for Probate, there is no Grant to submit.

We will be applying for Letters of Administration, which to me is effectively the same as applying for Probate.

Typically life insurance payouts are direct to the benficiary. And thus not included in the estate or for IHT. They are deliberately arranged this way precisely to avoid IHT. Not always true, and it does depend on the wording of the policy, but this is the most common arrangement.

1. Why would they need to see sight of the Probate if the proceeds are excluded from the estate?
2. The form is to be completed by the claimant (my wife), who is not the personal representative of the deceased. Or am I missing something?

1. I think they are confused by the fact that they are dealing with you (Executor/Administrator) rather than the beneficiary. If YOU were making the claim, you'd need the Grant to prove you have the right to act. Your wife, as beneficiary, should not. I suggest your wife simply writes that there is no will/probate in the notes on the claim form.
2. As I said, typically life insurance goes direct to the beneficiary, so I would expect the beneficiary to have to submit the claim form, not the executor/administrator.

The claim form asks for the beneficiary/claimant's details, and their signature - no mention of next of kin/the personal representatives/me.

UPDATE
I took the bull by the horns, and called the Scottish Widows.

They said that as the Trustee (late aunt) has passed away, the personal representatives of the deceased now become the Trustees, and therefore should make the claim for the proceeds after Letters have been granted, and then distribute as they see fit. So they will be sending out a new claim form to be completed.

I assume that these funds should still be omitted from any IHT reporting, is that correct?

I will be in the difficult position of trying to advise the siblings that as personal representatives they should try to respect the late aunt's wishes - however it will look like I am looking after my wife's interests. Which I am in a way, but it is more a case of reflecting the aunt's wishes to favour my wife, rather than treat all relatives equally. The siblings have no wish for any of the proceeds, and will be considering how to divide it amongest nieces, nephew, and grand-nieces.

elkay

[DrFfybes]

UPDATE
I took the bull by the horns, and called the Scottish Widows.

They said that as the Trustee (late aunt) has passed away, the personal representatives of the deceased now become the Trustees, and therefore should make the claim for the proceeds after Letters have been granted, and then distribute as they see fit. So they will be sending out a new claim form to be completed.

I assume that these funds should still be omitted from any IHT reporting, is that correct?.

elkay

I think SW are confused, or their processes are poor.

Some of many sites that explains it...
https://www.moneysupermarket.com/life-i ... e-a-claim/
https://www.mariecurie.org.uk/help/supp ... -insurance

If the policy is In Trust for the named beneficiary (and you'd need to see the original policy for this, although SW mention Trustees and AIUI if the beneficiary is a named person other than the policyholder then this is In Trust) then they only need the Death Cert and Claim form from the beneficiary.

It should not be up to you to override a contract between the Deceased and an Insurance company - AFAIK there is no discretion on how the money is distributed - it goes to the named Beneficiary (assuming they're alive).

Paul

[elkay]

Some of many sites that explains it...
https://www.moneysupermarket.com/life-i ... e-a-claim/
https://www.mariecurie.org.uk/help/supp ... -insurance

If the policy is In Trust for the named beneficiary (and you'd need to see the original policy for this, although SW mention Trustees and AIUI if the beneficiary is a named person other than the policyholder then this is In Trust) then they only need the Death Cert and Claim form from the beneficiary.

It should not be up to you to override a contract between the Deceased and an Insurance company - AFAIK there is no discretion on how the money is distributed - it goes to the named Beneficiary (assuming they're alive).

Paul

Neither of those sites explained in enough detail to cover the actual circumstances. But the Legal & General website does explain better:

How is life insurance paid out to beneficiaries?
It’s very rare that a beneficiary receives the money from a life insurance payout directly. There are two ways that the lump sum can be paid. Firstly, following a valid life insurance claim, the payout is paid directly to the legal owner of the policy or their personal representative, which is often the executor of the will. The executors are ultimately responsible for distributing the proceeds of the estate in accordance with the will. If the deceased didn’t leave a will, the lump sum will be paid to the administrators. Secondly, if the policy was written under trust, the money from a payout is paid to the surviving trustees as the legal policy owners, and they would subsequently distribute any funds to the beneficiaries.

So it appears that the SW are correct. The confusion arises because they do not clearly address the difference between when there needs to be a Grant (Probate/LOA), and where a Grant isn't required.

Unless someone can provide a better source that is at odds with this, it looks like we will have to wait for LoA.

elkay

[genou]

They said that as the Trustee (late aunt) has passed away, the personal representatives of the deceased now become the Trustees, and therefore should make the claim for the proceeds after Letters have been granted

elkay

This is the key bit. It could have been avoided by having additional trustee(s) who were still alive after the aunt died. The proceeds of the policy could have been paid to them regardless of probate / LoA.