Guarantee Period of Annuity and Funeral expenses

mum_of_joey

I posted this earlier on the Death and Funerals site but now think that it belongs here. Please let me know if I am mistaken.

After a lot of consideration, I have decided to buy an Annuity (an Enhanced one, because of my medical history), from a previously unknown Pension Pot (long story which has appeared here before) and am unsure about how, if I chose one with, say, a Guarantee Period of 3, 5, 10 or more years, how my estate will be dealt with if I should die during any of those periods that I have bought the Guarantee element for.. I have a large number of (credit card) debts (+ a bank overdraft with my old bank) and am paying these off through the StepChange Charity but they will take many years..

I know that the distribution of an estate runs in a strict order - ie Secured debts (not applicable in my case), then Funeral expenses etc, then the list goes on until Unsecured debts, which IS applicable (credit cards etc) and then the beneficiaries come last. My only beneficiary will be my adult son.

I have been told by the Annuity provider that the Annuity income will be paid into my estate on a MONTHLY basis (just as the income will come in to my bank account whilst I'm alive) for the (remaining) period of that Guarantee period (ie after I die), therefore no 'lump sums' would be available for use in funeral expenses.
My questions are:

1. Can estates be kept open for the remaining years of the Guarantee period after my death, in which case, presumably my (unsecured) creditors would try to get some money monthly for the rest of that period and then the rest may have to be written off?

2. What about the funeral? I doubt that a funeral provider will accept Annuity payments for the period of the Guarantee period. I gather that if someone paid for my funeral, they would not necessarily get any of that money back if there were still outstanding creditors. I rent my house so I will have no money to speak of on my death, except for the income from the Annuity for however many years I decide on.

Someone on the Funerals site has led me to an article saying that funeral payments cannot be taken from the personal belongings of the deceased, so presumably the only fund will be the income being paid in from the Annuity. But this will only be paid in monthly and will only total about £1200 a year.

3. If I, whilst I am still alive, bought a cheapish Funeral Plan from the income from my Annuity (say from Pure Cremations or similar, which is under £2,000, but with no service, or a basic 'proper' funeral costing a bit more) would that be frowned upon by the creditors? In that that money could have gone to them? If Funeral expenses take precedence over Unsecured Creditors when I'm dead, do they not take precedence over Unsecured Creditors while I'm still alive?

(Just as a note, although I qualify for an Enhanced Annuity, I'm only 67 and don't plan to die just yet! So it might all be academic if I live past the limit of the Guarantee period as the Guarantee period with have expired, of course.)

My son would be my only beneficiary, but even though he is, the Annuity income would be paid into my ESTATE, and not directly to him, but don't want him to 'foot the bill' for my funeral, should I die, so wanted to make SOME provision for my funeral, if possible.

I hope that all this is understandable and not too confusing.

kidmugsy

Over-50s Life Insurance requires no medical, and can be arranged (with some providers) to be paid in trust to someone - e.g. your son. That way the payout never enters your estate.

https://www.moneysavingexpert.com/insurance/over-50s-life-insurance/

mum_of_joey

Thank you for that. I have looked at the article and I think that this is something that I will have to consider, with the slight reservation that I would have to have a good guess at the date that I take it out as you pay in forever, it seems (or till at least 90) and may end up paying in a lot more than my son will get out by the time I die, if I do happen to remain alive longer than predicted.

With regard to setting up a trust, I gather that the possible cost of a solicitor setting it up can be about £1,000, and they seem adamant that there are pitfalls if you don't use a solicitor.

So would it be better to miss the 'trust' bit out and just take out a funeral plan, leaving instructions as to how it can be accessed by my son, or will this be seen as depriving myself of capital, with regard to the benefits that I am on?

kidmugsy

The thing is to find a provider who looks after the trust business for you. I looked the other day at the over 50 policy of the Foresters Friendly Society. The website said that the first £5k of the payout is treated by them as being in trust.

I have no idea whether their policy is competitive in price but I was struck by that remark.

Sorry, I know about neither funeral plans nor about annuity guarantee periods.