Scottish Widow query

happytet

Can anyone answer this question for me. I was left by my Mother various Scottish Widows units in Corp Bonds etc. (my Mother's ISA). Scottish Widows on transferring units to me (changed to OEIC) sold some units to pay tax. We are talking a small amount. Do they have the right to sell without notifying me or obtaining executor's permission? I can give more detailed information if needed. Have tried asking Scottish Widows, but they do not give reasons why they sold without advising me (or executor) only that a small amount of tax had to be paid!:( I am at a loss to know who will give me an answer that makes sense. Thank you to anyone who can help - hope this is the right way to do this haven't asked a proper question before.

Baldur

You are likely to find a similar clause in the Scottish Widows Ts & Cs to that quoted below from Ecclesiastical - http://www.ecclesiastical.com/uploads/PDF%20-%20ISA%20Terms%20and%20Conditions_tcm9-2342.pdf

On termination, however arising, the ISA Investments will be realised and the net proceeds paid to the ISA Holder within 15 days thereafter.

ISAs are automatically terminated on the death of the ISA Holder and cease to be exempted from tax. Notwithstanding that an ISA has been terminated or that a request has been given to transfer the ISA to another ISA manager, these Conditions will apply (as appropriate) until all outstanding transactions and liabilities have been performed and discharged.

happytet

So what you are saying in essence is that they had the right to sell to pay the tax and did not have to advise or request our permission? We would rather have paid the £10/15 and not lose any units. Does not seem fair

googler

My bank deducts tax at the standard rate before paying interest to me on my accounts. How is this any different?

If the tax is overpaid with respect to the deceased's last earning status and tax code, you claim a refund from HMRC. If underpaid, you send a cheque to HMRC

happytet

This is what I do not understand any unpaid tax could have been claimed from dividend earned or I could have paid a cheque for the small amount. I have now lost money not only to the taxman but on future earnings from the units sold! It doesn't make sense to me. Why did Scottish Widows not write a letter and request the small amount from me and ensure that all my units stayed intact!.

dunstonh

So what you are saying in essence is that they had the right to sell to pay the tax and did not have to advise or request our permission? We would rather have paid the £10/15 and not lose any units. Does not seem fair

The problem is that it was an ISA previously. It loses that ISA status on death and the back tax has to be paid and the provider is liable. Selling of units to cover the tax is fair. You can always add £10/£15 to the investment to make it back up again. Also, as its within the investment, it reduces any potential CGT liability.

This is what I do not understand any unpaid tax could have been claimed from dividend earned

They cant wait for an interest distribution on the corp bonds. If they have to settle it then they have to settle it.

I have now lost money not only to the taxman but on future earnings from the units sold!

You had to pay that money one way or the other. Indeed, its quite probable that the tax had to be settled before stock transfer. In which case the estate paid it, not you. So, you havent lost anything.

Why did Scottish Widows not write a letter and request the small amount from me and ensure that all my units stayed intact!.

Why dont you just buy £15 of units or better still, bed&ISA the investments or use better quality corp bond funds and earn even more?

happytet

Thanks for your in depth reply. In actual fact I had given up on getting the money back, but my Father who is 84 is adamant that the number of units belonging to my Mother should have stayed the same when transferred to me. I am trying to get a proper explanation to give him to satisfy him. He's stuck on the principle that they had no right to sell our property, or at least prove to us that they did have the right.!!! There was no capital gains involved (sorry just reading each of your quotes through). What does bed&ISA mean? I would love to change the corporate bonds but Dad is stuck with Scot Wids as they are part of Lloyds. Thing is he gets the interest I dont!

dunstonh

He's stuck on the principle that they had no right to sell our property

problem is that it is not your property until it becomes owned by you. Its part of the estate and typically bills have to be settled before the distribution of the estate.

or at least prove to us that they did have the right.!!!

Many contracts nowadays are explicitly charged and cash units to pay charges (with income when it comes back in buying new units). it is very very common and quite normal for units to be used for that purpose.

There was no capital gains involved (sorry just reading each of your quotes through).

There may not be but taking charges within the investment on unit trusts is an effective tax mitigation.

What does bed&ISA mean?

It is where the unit trusts are sold and bought back within the ISA. Therefore avoiding future tax being paid on the income.

I would love to change the corporate bonds but Dad is stuck with Scot Wids as they are part of Lloyds.

Many of the lloyds products are not the retail SW products/funds but re badged LTSB life or Black Horse Life funds. Even for new business the branches dont offer the full SW range. You need an IFA or whole of market broker to access the full SW range. Plus, investing with one fund house is very old fashioned and not many do it nowadays. Only mainly the banks but thats because its in their interests to do it that way. If he wants more interest then he should look to either the wider SWIP range or go whole of market.

happytet

Thank you so much for your help, I do understand, and I will now see if I can print and show my Dad so that he accepts the situation. It's a pity that Scot Wids didn't take the time to explain properly in their letters what they can and cannot do. If they had done so it would have saved me a lot of time and energy trying to get an explanation!!

Many thanks to all who replied, what a wonderful site this is.