Death in Service, please help...

glosoli

Hi,

This is Scotland and Scottish law.

My mother passed away on 28/05/2021 unexpectedly, and post funeral we are looking to organise her estate. She had NO will.

To confirm the family set up, she had a partner (not married) for 28 years, and with him she had one child (now 23). Myself (32) and my brother (36) have a different father.

My mother owned jointly a property with my step father (worth £180,000), with a mortgage of £50,000, which will be repaid from her level term life insurance policy (£90,000). My stepfather is the beneficiary of this policy, meaning he will have £40,000 remaining. The house is also being transferred to his name as the title was on a survivor basis. 

She worked for a well known financial organisation, where the death in service benefit is x8 salary (works out to be around £260,000, plus a pension pot of around £23,000, meaning the total value is £283,000).

The Trustees of the scheme are currently deciding how this money should be divided and are currently in deliberation. 

My question is, does anyone know how this is likely to play out? For example if it followed the laws of inestacy, then the £283,000 should be split amongst the three children. However I understand that this may not be the case. There was no expression of wish form completed. On the beneficiary form I completed, the stepfather and the 3 children were listed as beneficiaries.

I feel terrible for thinking about financial matters at a time like this given its a difficult time for everyone, but anyone's input would be much appreciated here.

Old_Lifer

The Trust Deed governing the scheme  will set out the powers of the Trustees and will usually give the Trustees wide discretion on how the money is distributed.    May I suggest that you approach the Trustees and voice your concerns

The expression of wishes form is just that, only an expression of wishes.   Trustees will usually go along with that but not always.

tacpot12

My expectation would be that the trustees would start by looking at the effect of splitting the amount equally between the children and the unmarried partner. However, some schemes have a distinct bias against unmarried partners, and as a result the trustees may decide to pay a smaller amount to your mother's partner. However, living with someone for 28 years means that the relationship was clearly akin to marriage. The trustees may find themselves constrained by the rules of the scheme, and you may find it useful to get hold of a copy of the rules if you can.

If you write to the trustees to inform them that as a result of the term insurance policy, your step-father has inherited his house and £40,000, then may take this into account if they are minded to include him in the settlement.

As it stands, it seems likely that you will receive between a quarter and third of £283,000, which will likely make a big dint in your mortgage or allow you to buy a home if your don't already have a mortgage. I would encourage you to the be happy with whatever your receive and try to remain on good terms with your step-father as you have all lost someone very dear to you.

Brie

I also work for a large financial organisation with an 8x life benefit.  As this was attached to the work pension I needed to advise my employer who the beneficiary would be.  The administrators of the scheme used to do frequent reviews of who had not completed this and would ask for it to be done.  But it seems like you're saying she never did this.  

So the administrators would then review whether they would accept any expression of wish they had on file and compare it with other information they have regarding an employee.  Who's the next of kin on the employee's emergency contact form etc.  

You could conceivably argue that if your mom didn't complete an EoW form then she was undecided and that therefore due to dying without a will the money should be split amongst her children, possibly excluding her partner.  I doubt they will care what has happened to other parts of her estate - that is not their business.  Her partner might have received several million from other policies quite legitimately but that will not influence how the life benefit and pension will be paid out.

In the meantime - I'm sorry for your loss and that you have this extra burden to sort.

Old_Lifer

Brie -  The death-in-service lump sum is not part of her Estate. 

Unless things have changed since my day,  it is term assurance usually costed on a single premium basis and paid for by the Employer with the cost recalculated each year on the scheme anniversary.

Marcon

tacpot12 said:

My expectation would be that the trustees would start by looking at the effect of splitting the amount equally between the children and the unmarried partner. However, some schemes have a distinct bias against unmarried partners, and as a result the trustees may decide to pay a smaller amount to your mother's partner. However, living with someone for 28 years means that the relationship was clearly akin to marriage. The trustees may find themselves constrained by the rules of the scheme, and you may find it useful to get hold of a copy of the rules if you can.

Those days are long gone, particularly where the parties had lived together for a long time (and 28 years is much longer than many marriages).

OP, there's really no point in getting hold of a copy of the rules. The trustees can be expected to be well aware of their options and any constraints in the rules, especially in an organisation of this type. They are likely to be doing their own due diligence (e.g. talking to her work colleagues), and will ask potential recipients for more information if this is needed.

Brie said:

You could conceivably argue that if your mom didn't complete an EoW form then she was undecided and that therefore due to dying without a will the money should be split amongst her children, possibly excluding her partner.  

Trustees are well used to people dying intestate and with no EOW form, so they are unlikely to attach any weight to this.

Nobody here can guess how things will turn out. If the trustees really find themselves unable to make any other decision, they may well decide to pay it to the estate and it would indeed then follow the rules of intestacy. It will still be tax free, given that payment to the estate was made at the discretion of the trustees.

I'm afraid it really is a case of just waiting to see what happens. It may well be some months before any decision is taken.

Old_Lifer

Paid to the Estate ?   It isn't part of the Estate.

The  Rules will specify the various classes of individuals who can benefit,  usually with a 'catch-all' provision at the bottom of the list.    They form part of the Definitive Trust Deed which is quite a lengthy document of around twenty pages or so, which will have  been approved  by the specialist part of HMRC which deals solely with pension schemes.   At  the Regional Office where I worked , we had several thousand copies of such deeds for schemes within our Region (all printed on yellow paper).

glosoli

Hi all,

Just an update for anyone googling this in future as I struggled to find any real life examples of outcomes.

In the end, the Trustees decided it should be split 25%, between me, my brother, my sister and my stepfather. Everyone is happy with the outcome, and it does seem the length of time they were together meant he wasn't "written out".

The payments have indeed been made to all parties directly.

There is currently another similar process on going with her Royal Mail pension, and I will update the thread again once that is resolved. 

Marcon

Old_Lifer said:

Paid to the Estate ?   It isn't part of the Estate.

It would be if the trustees had decided to pay it to the estate - it just wouldn't be subject to IHT, if the payment had been made at the discretion of the trustees. 

Old_Lifer said:

The  Rules will specify the various classes of individuals who can benefit,  usually with a 'catch-all' provision at the bottom of the list.    

...which is usually words to the effect of 'the member's personal representatives or executors'.

Old_Lifer said:

Paid to the Estate ?   It isn't part of the Estate.

They form part of the Definitive Trust Deed which is quite a lengthy document of around twenty pages or so, which will have  been approved  by the specialist part of HMRC which deals solely with pension schemes.   

Never seen a pension scheme trust deed that short, so presume you are referring to deeds which cover schemes providing lump sum death benefits only but are classed as Registered Pension Schemes in accordance with the Finance Act 2004.

Old_Lifer

The final class of individuals on our schemes  was  'any other person who in the opinion of the Trustees.......etc......'

During my service an Interim Trust Deed would be issued to establish the Trust,  followed later by a Definitive Trust Deed which  would be the main document governing the pension scheme and was usually a couple of dozen pages of A4 size.  There would then be added any further deeds such as deeds for Retirement/Appointment of New Trustee.

I have noticed over the years the use of policy booklets for life policies  containing page after page of policy conditions,  so longer pension scheme deeds would not surprise me.

glosoli

glosoli said:

Hi all,

Just an update for anyone googling this in future as I struggled to find any real life examples of outcomes.

In the end, the Trustees decided it should be split 25%, between me, my brother, my sister and my stepfather. Everyone is happy with the outcome, and it does seem the length of time they were together meant he wasn't "written out".

The payments have indeed been made to all parties directly.

There is currently another similar process on going with her Royal Mail pension, and I will update the thread again once that is resolved. 

Hi all,

After a longer wait with royal mail (Capita are the administrators), they have finally concluded their part of the process.

Interestingly they decided to split the pension between me and my two siblings and awarded nothing to my stepfather.

And that's everything sorted now, meaning we can finally move on and grieve properly.

Thanks all.