paying IHT on a family income policy.. Please help

sammykins1978

Hi I wondered if anyone could help me.. my partner passed away 18 months ago.. We have 3 children.. He had 2 life assurance policies that paid out as an annual income until his youngest child reaches 18, my boys are 9, 11 and 14.. For some reason my solicitor couldn't get a figure to work from when completing the probate form to send off to the Hrmc, so as from Oct 2015 I have a probate issued with the estate value on the property and other insurance policies, but not the family income policies. As my solicitor didn't know what form to use for the income policies he just told the hmrc that they existed and told them how much is paid annually.. After months of waiting the solicitor received an annuity calculation from hmrc which is used to work out the estimated open market value of the policies, they have also applied income tax on the money too.. I think this is wrong as the insurance company said there is to be no income tax payable. I'm just wondering if anyone has ever dealt with life assurance policies that pay out as a family income for the beneficiaries which are his children.

Can hmrc use an annuity calculator on the policies seeing that they are not annuity policies, they were only paid out after his death from the date he died.

Thank you if anyone could shed some light on this I would be so great full

sammykins1978

By the way my solicitors are useless

Yorkshireman99

sammykins1978 wrote: »

Hi I wondered if anyone could help me.. my partner passed away 18 months ago.. We have 3 children.. He had 2 life assurance policies that paid out as an annual income until his youngest child reaches 18, my boys are 9, 11 and 14.. For some reason my solicitor couldn't get a figure to work from when completing the probate form to send off to the Hrmc, so as from Oct 2015 I have a probate issued with the estate value on the property and other insurance policies, but not the family income policies. As my solicitor didn't know what form to use for the income policies he just told the hmrc that they existed and told them how much is paid annually.. After months of waiting the solicitor received an annuity calculation from hmrc which is used to work out the estimated open market value of the policies, they have also applied income tax on the money too.. I think this is wrong as the insurance company said there is to be no income tax payable. I'm just wondering if anyone has ever dealt with life assurance policies that pay out as a family income for the beneficiaries which are his children.

Can hmrc use an annuity calculator on the policies seeing that they are not annuity policies, they were only paid out after his death from the date he died.

Thank you if anyone could shed some light on this I would be so great full

Change your solicitor and lodge a formal complaint against the old one who should compensate you for any losses incurred. As tgrusts for the minors are involved find a STEP qualified solicitor.

nom_de_plume

http://www.moneysupermarket.com/life-insurance/tax/

Some very basic reading in the link above which may clarify things a little.

If the insurance company say no tax is payable then it sounds like the policy was written "in trust" and would fall outside the estate for IHT purposes. Possibly a simple question to ask the insurers direct rather than faff bout with a "useless" solicitor?

nom_de_plume

Slight cross purposes with my reply and your original post as the tax question was on the income. A quick search around the internet suggests income from such policies is currently income tax free.

sammykins1978

Hi thanks for your reply.. They are not in trust.. I wish they were.. my partner actually had a meeting with the financial advisor to put them into trust the day he went into hospital .. so looks like it's 40% which will be a hefty tax bill.. you are right no income tax is payable. . I'm just confused why hmrc have put the policies on an annuity calculator. . What I really want to know is how they will tax it. . Would it be on the whole amount of money I receive or would it be on a commuted value, because if I wanted to cash the money in early (which I dont) then it will be a lesser value