Prudential Life Assurance - Inheritance Tax

thigger

Hi,

My wife's aunt passed away and we are trying to sort out her estate and apply for probate. With her house, and the fact she can't make use of any extra nil-rate band there is going to be inheritance tax to pay - and unfortunately not enough easily-accessible cash to pay it.

She had a Prudential "RD1" life assurance bond which has enough to pay the tax, but Prudential are being evasive about whether this can be used to pay the inheritance tax directly (via the IHT423 direct payment scheme) and keep sending us requests for probate letters on the assumption we want the money paid to ourselves.

To avoid having to borrow money or pay HMRC's interest rates until the house is sold, does anyone know if we can get Prudential to pay this money directly to HMRC before probate is granted? Given that they advertise their life assurance policies as a product to pay inheritance tax, I'm wondering if I'll have to suggest involving an ombudsman?

Thanks for any advice.

(also posted in the Life Assurance forum)

Grey_Critic

You might think about employing a solicitor they will sort the whole thing out for you. You will need to employ one anyway when the house is sold.

thigger

Cheers, but the £10,000 quote was offputting to say the least! We've done all the work and are just filling in the forms - it's just a matter of where the IHT money is going to come from.

Keep_pedalling

Even if they would pay directly to HMRC it is only going to get paid a couple of days earlier than if they paid you. We have a similar policy which is written in trust to pay out to our children. It does not form part of our estate so it does not need probate before it is payed out.

You could always elect to pay in instalments which means you would need 10% of the total IHT bill to meet the first payment, the rest to be paid out either from the property sale or the insurance. Interest should be minimal as long as you can get to pay the rest out within a few months.

Tom99

Are you saying the Pru want probate before they will release this money?
Is the life insurance written so that it is outside Aunt's estate and goes direct to her named beneficiaries? If so they should not require probate. Or is IHT having to be paid on this payout?
Re the house, as KP says elect to pay by installments and send a final payment as soon as proceeds are received. There is an online calculator you can use to work out the interest you owe and if you happen to overpay by a few days interest you will get a refund.

thigger

Keep_pedalling wrote: »

You could always elect to pay in instalments which means you would need 10% of the total IHT bill to meet the first payment, the rest to be paid out either from the property sale or the insurance. Interest should be minimal as long as you can get to pay the rest out within a few months.

Tom99 wrote: »

is IHT having to be paid on this payout?
Re the house, as KP says elect to pay by installments and send a final payment as soon as proceeds are received.

Unfortunately the life assurance isn't written in trust so IHT needs paying on it. I've had a look into the installment option and unfortunately it looks like it's rather more than 10% - the entire amount due on the assurance needs paying before probate. However, it at least means the amount due on the house can be delayed and potentially as a family we can put enough together to pay the initial part and then pay the rest once the assurance comes through.

Absurd, but I think we have scraped together something of a solution without resorting to bank loans! Thanks for the help.

Marcon

thigger wrote: »

She had a Prudential "RD1" life assurance bond which has enough to pay the tax, but Prudential are being evasive about whether this can be used to pay the inheritance tax directly (via the IHT423 direct payment scheme) and keep sending us requests for probate letters on the assumption we want the money paid to ourselves.

Not sure the Pru are being 'evasive' as you suggest - sounds more like they're confused (hardly a rare occurrence...). Have you tried ringing them to discuss - if necessary asking to be put through to someone higher up the food chain.

thigger

Marcon wrote: »

sounds more like they're confused (hardly a rare occurrence...). Have you tried ringing them to discuss

From the sounds of other comments in the thread on the life assurance board it appears they don't/can't offer the service, which might explain their confusion that we're asking for it. We've phoned, emailed and written, and despite specifically asking about IHT423 their responses have only dealt with getting the money paid to the executors after probate. I think we're going to go with the cobbled-together plan and then use the policy to pay everyone back and pay the remainder of the tax after probate is granted.

Keep_pedalling

The big mistake was not having the policy written in trust, which would have taken the payment of IHT and would have enabled the policy to be paid on production of a death certificate, rather than having to wait for probate.

thigger

Keep_pedalling wrote: »

The big mistake was not having the policy written in trust

Yep. Went round for ages trying to prove it must have been written in trust - but apparently it wasn't.

badmemory

When this is all sorted out it may be worth going back to the original ins documents to see if someone did actually mess up!