Probate - Joint Life Insurance Bond and Property Valuation

cazian

I am currently trying to calculate the value of my late mum's estate (no will made), but I am unsure how to treat a joint life bond for the purposes of calculating the value of her estate.

My dad (her husband) is still alive and they were joint bond holders. The death benefits are paid when the last life insured passes away (i.e. my dad). Aviva, the bond providers, have written confirming the bond will carry on with my dad as the sole life insured.

They go onto to say that a percentage of the bond's value can be applied to my mum's estate and "the personal representatives of the estate need to decide how much to apply as we can't comment on the initial investment share made by each individual".

As my mum and dad were married, wouldn't the bond's value count as a non-taxable asset, for the purposes of Inheritance Tax, and not be included in the value of the estate for Inheritance Tax purposes? Does it matter who funded the bond initially and in which proportions?

Finally, do I have to obtain a valuation for their marital home for probate? They were joint owners, mortgage-free and my dad still lives there. I know that the value of the house is excepted from the value of the estate for Inheritance Tax purposes, as they lived there as a married couple, and the house passed to my dad, but do I still have to obtain a property valuation nonetheless? The house itself may be worth just over the £325,000 IHT zero band limit, but for the purposes of the form filling, will it be form IHT205 or IHT400 that will need filling out (as the estate will be worth much less than £325,000, if the exemption for the property passing to my dad is taken into account)? Does the house value even have to be included in the asset/liability account that I have to prepare, as the value will be ignored for the Inheritance Tax calculation?

Any help would be appreciated.

g6jns_2

cazian wrote: »

I am currently trying to calculate the value of my late mum's estate (no will made), but I am unsure how to treat a joint life bond for the purposes of calculating the value of her estate.

My dad (her husband) is still alive and they were joint bond holders. The death benefits are paid when the last life insured passes away (i.e. my dad). Aviva, the bond providers, have written confirming the bond will carry on with my dad as the sole life insured.

They go onto to say that a percentage of the bond's value can be applied to my mum's estate and "the personal representatives of the estate need to decide how much to apply as we can't comment on the initial investment share made by each individual".

As my mum and dad were married, wouldn't the bond's value count as a non-taxable asset, for the purposes of Inheritance Tax, and not be included in the value of the estate for Inheritance Tax purposes? Does it matter who funded the bond initially and in which proportions?

Finally, do I have to obtain a valuation for their marital home for probate? They were joint owners, mortgage-free and my dad still lives there. I know that the value of the house is excepted from the value of the estate for Inheritance Tax purposes, as they lived there as a married couple, and the house passed to my dad, but do I still have to obtain a property valuation nonetheless? The house itself may be worth just over the £325,000 IHT zero band limit, but for the purposes of the form filling, will it be form IHT205 or IHT400 that will need filling out (as the estate will be worth much less than £325,000, if the exemption for the property passing to my dad is taken into account)? Does the house value even have to be included in the asset/liability account that I have to prepare, as the value will be ignored for the Inheritance Tax calculation?

Any help would be appreciated.

As there is no will the laws of intestacy apply. You need to establish if the house was owned as joint tenants or tenants in common as this will affect how much, if any, of the house value needs to be included in the estate. I don't think the bond has to be included as no payout at this time. You might want ask your dad if he wants the bond payable to you on death so it does not fall into his estate. He would need to ask Aviva if this was possible.

cazian

Thanks for your response, g6jns (is that a ham callsign?).

My mum and dad were married and joint tenants, as opposed to tenants in common, so as I understand it, the house value would not fall into my mum's estate valuation. But I'm still not clear if an official valuation for the house has to be obtained nonetheless for probate and completion of the Inheritance Tax form.

G6JNS

cazian wrote: »

Thanks for your response, g6jns (is that a ham callsign?).

My mum and dad were married and joint tenants, as opposed to tenants in common, so as I understand it, the house value would not fall into my mum's estate valuation. But I'm still not clear if an officila valuation for the house has to be obtained nonetheless for probatena d completion of the Inheritance Tax form.

Yes it is! Just put in a reasonable valuation based on similar properties locally. Ask a couple of agents to give a value as if you were thinking of selling.

cazian

Thanks again G6JNS.

The more I read, the more my confusion grows as to how to correctly calculate the value of my mum's estate, for the various different purposes (IHT, intestacy rules, whether it will be an "excepted estate"). It appears that the estate will be exempt from Inheritance Tax.

However, I need some clarity on the intestacy rules. The situation here is that my dad is still alive and they were married when my mum died and they had joint ownership/joint tenancy of their house. My sister and I are their adult daughter and son. Under the intestacy rules, my dad will get the first £250,000, personal belongings & life interest in half the rest. The balance would go to my sister and I.

Although the house transferred to my dad as spouse by his survivorship, for the purposes of establishing if the £250,000 figure mentioned above will be exceeded, does half the value of the house have to be included in the gross estate calculation, or is that ignored for the calculation, because my mum's share passed to her spouse, my dad? This will be crucial in establishing if my dad will keep everything, or whether he will have to pass on anything to my sister and I, if half the property value combined with other assets exceed the £250,000 figure.

Likewise, would half the value of the money which automatically transferred to my dad from their joint bank accounts also have to be taken into account in calculating if the £250,000 limit will be exceeded, or would this also be excluded for that purpose?

I hope this makes sense.

Savvy_Sue

I think that your mother's half of these assets have to be declared, even though they passed direct to your dad.

Anyone disagree with me?

Keep_pedalling

Savvy_Sue wrote: »

I think that your mother's half of these assets have to be declared, even though they passed direct to your dad.

Anyone disagree with me?

I tend to agree with you, at some point the OP's parents put a lump sum into this bond. As I understand it these products were popular when CGT was higher and were used to reduce tax. They certainly pay out on the second death but normally bond owners still have access to these assets in that they can draw down on the funds or cash them in totally.

cazian

Thanks Savvy_Sue and Keep pedalling for your replies. I think you are right, from my understanding about having to declare the assets I mentioned (on the Inheritence Tax forms). I think this information is required, so HMRC can establish if an estate is an "excepted estate", i.e. worth under £1m.

However, my real query is whether the assets (my late mum's share of jointly tenanted property, life bond and joint savings accounts) count towards the gross valuation of the estate for the purpose of the intestacy rules, i.e whether they have to be counted in working out if the gross value of the estate will end up tipping over the £250,000 limit, under which my dad would keep all the estate, without having to worry about any excess assets having to be distributed to my sister and I. Reading elsewhere, it appears that the deceased's share of jointly held assets that automatically pass to a surviving spouse falls outside the estate valuation, but I want to make sure this is definitely correct.

I hope this makes sense?

Savvy_Sue

Ah yes, that makes sense, and sorry I don't know, but if in doubt I'd call your local probate registry?

cazian

Thanks Savvy_Sue. The website for the local Probate Registry refers you to a HMRC Helpline, which specifically answers queries regarding probate (as well as Inheritance Tax), telephone: 0300 123 1072 - though they don't give advice.

They confirmed that a jointly owned asset, like the marital home, does not form part of the value of the estate for the purposes of the intestacy rules. The same applies for the money held in joint accounts, which again passes automatically to a spouse, and is not included in the calculation of the value of the estate for the purposes of the intestacy rules.

I hope this helps anyone else in the same situation.