Death in service - probate

Loulibell

Hi all, I wondered if someone could advise me and maybe confirm my worries or help me sleep at night 😂. 

So my mother passed away in 2020, I spoke to a couple of ‘probate guys’ who in short seemed very unprofessional and at the time I was in a terrible place. I decided to do the probate stuff myself, and believe I did a good job. Included absolutely everything that I could think of and got professional valuations done for things that needed it. 

However, a few months down the line after probate was granted and completed with no IHT to pay, her employer informed me of a death in service claim he could do on his company insurance. I was told at the time that this wasn’t taxable and that it didn’t need to be included in probate. Is this true? Because I read something a couple of days ago that’s driving me crazy. She wasn’t named on the policy, and the payment was sent directly to me as her next of kin. 

The wording on the probate application if I remember rightly was policies ‘owned by’ the deceased. And I’ve seen conflicting information now on whether I should be paying tax on it or not. Am I in trouble? Should I ring HMRC and tell them about it? Terrified at the thought I’ve done something wrong and buggered it all up! 

Thanks in advance for any help you can give if I can’t get back to you!

RAS

If you were  nominated to receive the death in service payment, at the pension funds discretion, the payments is outside the estate. It's what my scheme do.

SevenOfNine

We dealt with 1 probate (well, LoA to be precise, as no will) with a death in service payment, it was £273k, fell outside the scope of the estate & was not taxable.

A beneficiary was nominated & the trustees of the fund checked with executors (me & my husband), that there was nothing in the 3 years since the nomination was signed that they needed to consider.

No, & payment was made directly by them to the beneficiary. 

Being next of kin doesn't necessarily mean you were sole beneficiary of the whole of the death in service benefit, but as that wasn't your question, then no tax in our case & more than likely correct for you as well.

My condolences for the loss of your mum.

BooJewels

I can concur with what others have said, I received a pension lump sum when my husband passed away last year - he'd nominated me to receive it and spoke to them to double check that all was in place when he knew he hadn't got long left and I did in fact receive it outside of his estate and the paperwork confirmed that it wasn't taxable.  I also got a life insurance element too as that was part of the package he had.  

Like many other financial things and tax, there is a threshold/allowance for these sort of payments too - I think it's around a million at the moment and each of the pension payments I had (3 in total, one was only £72) stated in the letter what percentage of my allowance their payment amounted to.  I wasn't going to be troubling HMRC.

Savvy_Sue

If they've sent the payment to you, then my feeling is that either you were nominated, or the trustees of the scheme have decided that you are the appropriate person to receive the sum. If they didn't think it fell outside the estate, they should have asked to see that you had probate. 

So another vote for no tax to pay ... 

BUT was the estate anywhere near IHT territory anyway? And if it was, would this sum have tipped you over? If it's a no to the first or the second, sleep easy, no tax to pay. 

Marcon

Loulibell said:

However, a few months down the line after probate was granted and completed with no IHT to pay, her employer informed me of a death in service claim he could do on his company insurance. I was told at the time that this wasn’t taxable and that it didn’t need to be included in probate. Is this true? Because I read something a couple of days ago that’s driving me crazy. She wasn’t named on the policy, and the payment was sent directly to me as her next of kin. 

The wording on the probate application if I remember rightly was policies ‘owned by’ the deceased. 

Relax. She didn't own the policy; the employer did (it would have been something known as 'group life cover') and payment would, as you've already been assured by the employer, be tax free.

Loulibell

Thank you all for your responses! They’re extremely helpful, and relaxed me a lot. 

Savvy_Sue said:

If they've sent the payment to you, then my feeling is that either you were nominated, or the trustees of the scheme have decided that you are the appropriate person to receive the sum. If they didn't think it fell outside the estate, they should have asked to see that you had probate. 

So another vote for no tax to pay ... 

BUT was the estate anywhere near IHT territory anyway? And if it was, would this sum have tipped you over? If it's a no to the first or the second, sleep easy, no tax to pay. 

I have checked should it fall in the estate which I don’t think it does, the estate would owe around £10k. So I may give them a call just to make sure. 

BooJewels said:

I can concur with what others have said, I received a pension lump sum when my husband passed away last year - he'd nominated me to receive it 

Sorry to hear of your husbands passing, I hope you’re doing okay. I wasn’t appointed/nominated. I was her only next of kin so I was asked for my details and my mothers details. It took a long while to complete because they had to check it was accidental death (inquest took a year and a day due to covid), had it not have been they wouldn’t have paid out. 

Thanks again for your help, part of me wishes id have gone with one of these probate guys. But as I called one of them his first words were ‘go on then, who's dead?’ Which didn’t sit well with me, and then the rest of the stuff he went on to say didn’t either! 😂 

BooJewels

Thank you @Loulibell - I'm doing okay thanks.  I'm getting cross with myself at the moment though, because sometimes it's hard getting stuff done with only one pair of hands on the job - I start things with good intentions, but have to abandon them or only do half a job, when I can't lift something on my own - or my pet bugbear at the moment - I just can't reach - a perpetual problem at 4'11"!  I don't like keep asking for help.

Even though I was nominated on my husband's main private pension, I still had to give details of all of his family members, including his long-estranged brother - presumably so that they could ensure there was no one more worthy than me!  It took them a good while to respond after that, which was a bit nerve wracking,

Nope, I don't agree about probate people - if it's a complicated estate then an accountant or financial adviser might be more useful to consult, but you already have to ascertain and supply the information that goes on a probate form - so you're just signing over 1% or whatever, for them to put your numbers onto a form - making them expensive form filling clerks.  Ouch, that sounds incredibly insensitive by him.  We've said on here many times that bereavement departments are usually very good and sensitive in handling on these matters.  Doesn't sound like he 'knew his audience'.