Pension Nominee and Deed of Variation (plus insolvent estate question added)

Sea_Shell

Morning.   Just a quick question that occurred to me, and I'm not sure it's been asked before...


Can you use a Deed of Variation in respect of an inheritance you receive by way of being a Pension, or Life Policy nominated beneficiary? Rather than as a beneficiary of an Estate.


I realise that this would usually fall outside of the estate of the deceased, but what if the cash pushes the recipient into (or further into) IHT territory for their own estate.


Do you have to GIFT it, subject to the IHT rules and allowances around gifts, should you want it to pass to someone else, rather than being able to use a DoV?


Part of me thinks that you CAN'T use one, the same as if you'd won the lottery, or come into cash by any other means.  But can you, if its as a direct result of someone's death?


Thanks.

Savvy_Sue

I'm not sure you can, but you MIGHT be able to divert the nomination. 

Payment to the nominee is generally at the trustees discretion, although where there IS a nomination it's usually followed.

If the nominee said "no thanks, please can Fred have it instead" - I don't know, maybe one for the pensions board?

xylophone

If the potential recipient is that concerned, he should discuss the matter with the Scheme Member who has made the nomination.

The Scheme Member can then either change the nomination or query with  his  Scheme  Administrator   whether the nomination can be on an either/or basis or even a percentage basis?

Sea_Shell

Ah yes, of course.  Trustee discretion!

I'd not twigged that, but yes, that would make sense.

Hopefully that wouldn't be viewed as any deliberate deprivation to avoid IHT, if you then passed within 7 years.

Mojisola

Savvy_Sue said:

I'm not sure you can, but you MIGHT be able to divert the nomination. 

Payment to the nominee is generally at the trustees discretion, although where there IS a nomination it's usually followed.

If the nominee said "no thanks, please can Fred have it instead" - I don't know, maybe one for the pensions board?

Is there a hierarchy of nominees?

Sea Shell - be careful refusing it in case it goes to the next in line rather the person you want to have it.

Sea_Shell

xylophone said:

If the potential recipient is that concerned, he should discuss the matter with the Scheme Member who has made the nomination.

The Scheme Member can then either change the nomination or query with  his  Scheme  Administrator   whether the nomination can be on an either/or basis or even a percentage basis?

It was a general question about "after the event", rather than an up front discussion, which of course would usually be best.

Also what might be agreed, could change the final outcome, especially if any investment related elements have skyrocketed in the intervening years.

Sea_Shell

Mojisola said:

Savvy_Sue said:

I'm not sure you can, but you MIGHT be able to divert the nomination. 

Payment to the nominee is generally at the trustees discretion, although where there IS a nomination it's usually followed.

If the nominee said "no thanks, please can Fred have it instead" - I don't know, maybe one for the pensions board?

Is there a hierarchy of nominees?

Sea Shell - be careful refusing it in case it goes to the next in line rather the person you want to have it.

Yes, that could be awkward, if next in line were someone you wouldn't have wanted to do a DoV to!

Eg a sibling, rather than either your own adult children or niblings.

All good for thought, and more knowledge accumulated and filed away!

Marcon

Sea_Shell said:

Can you use a Deed of Variation in respect of an inheritance you receive by way of being a Pension, or Life Policy nominated beneficiary? Rather than as a beneficiary of an Estate.

No, because any payment made outside the estate isn't subject to the terms of the will - and a DofV only applies to vary the terms of the will itself.

Sea_Shell

Just as a side question...

What should you do if, on the face of it an estate looks to be solvent, with substantial assets, but once you start to unwind everything, and contact their providers, you realise that there are very little assets (if any) left that count as the estate? 

It is possible to ascertain all of the following without having deemed to have intermeddled in the estate?

Investment Bonds (with 5% life insurance uplift element)
Pensions (State and Civil Service)
Life Insurance (not funeral specific)
Home owned as Joint Tenants

As you can see, one could hold substantial assets in the above, but none could actually be part of the estate, and other than a balance in a current account (and maybe a car) the estate could be insolvent.   Especially if there were any outstanding loans or credit cards.

xylophone

Re joint tenancy and debt

https://www.thisismoney.co.uk/money/cardsloans/article-1689651/Does-my-uncles-debt-die-with-him.html

Sea_Shell

xylophone said:

Re joint tenancy and debt

https://www.thisismoney.co.uk/money/cardsloans/article-1689651/Does-my-uncles-debt-die-with-him.html

Interesting article, thanks.

The most salient points being...

Where there is a jointly-owned or mortgaged home it is important to establish what the ownership status is. The property could be owned as 'joint tenants' or as 'tenants in common'. In a joint tenancy, the property automatically passes to the surviving owner and creditors cannot automatically expect that the property is sold to pay the debts.

However, within five years, they can apply to the court for an Insolvency Administration Order (IAO). In this procedure a trustee may seek to recover the value of the deceased debtor's interest in the property that has been lost to the estate by making an application to the court. The court may make an order requiring the surviving partner to pay the trustee an amount not exceeding the value lost to the estate....

...It is always worth asking creditors whether they will write off debts on compassionate grounds, even if there are assets, as some may agree to this. When you make this request you should make a case for why the debt should be written off. Such reasons would include any ill health of the surviving owner or if there are vulnerable people still living at the property.

So in an extreme example, a surviving spouse may have to sell their home IF the court lodge an order and the widow has no other means of paying the debt.   However, if the debt was only a few £1000 would the debtor go to such lengths?   Would asking for a "write off" count as intermeddling in an insolvent estate?