Life assurance provider refusing to pay out upon death of policyholder

Thirty years ago, my late father set up a trust naming me as beneficiary. The trust consists of a life assurance bond and is worth about £35000. The trustees are now deceased. The provider initially indicated to me that payment would be forthcoming within a few weeks. However, it has more recently been making excuses to avoid payment. For example, amongst other things, it is now advising that it cannot pay the proceeds to me unless the trust is first registered with the inland revenue. I am not sure that this is correct.

I’ve tried to do some research myself and it looks as if any obligation to register the trust, if applicable, would fall on the trustees, not the beneficiary. Also, as I am disabled there may be an exemption from registration, if indeed, the obligation to register is engaged by this type of trust.

In addition to the above, it seems strange that I would be required to register the trust only to have it brought to an end immediately the payout is made.

One thing I am absolutely sure about is that my father did not anticipate that I would have any difficulty securing payment upon his death, as he was advised that the proceeds would fall outside his estate and that no tax would be payable.

Can anyone advise me please?


Comments

  • sevenhills
    sevenhills Posts: 5,798
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    Thirty years ago, my late father set up a trust naming me as beneficiary. The trust consists of a life assurance bond and is worth about £35000. The trustees are now deceased. The provider initially indicated to me that payment would be forthcoming within a few weeks. However, it has more recently been making excuses to avoid payment. For example, amongst other things, it is now advising that it cannot pay the proceeds to me unless the trust is first registered with the inland revenue. I am not sure that this is correct.


    I think you will need to give more details if you want help. Who are the trustees and who is the provider, was a solicitor involved?
  • 30 years is a long time ago and taxation and trust laws have seen a lot of changes in that time. Some quite recent changes have required more types of trust to register with HMRC even ones where there will never be any tax to pay.

    When a trustee dies the surviving trustee(s) should get a replacement trustee otherwise you will end up with a neglected trust with no trustees to oversee it. If the trust needed to be registered but was for some reason it was not done it is going to cause this sort of issue.

    As seven hills said we need more information, who is the provider and what is the name of the product?
  • tacpot12
    tacpot12 Posts: 7,850
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    My partner recently received a letter about life insurnace policy that mentioned that the trust may need to be registered with HMRC but when I looked into it, it was a bare trust and these don't need to be registered. Reading between the lines of this letter it seems that insurance company didn't want to risk giving advice about whether the trust needs to be registered or not.   
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • Marcon
    Marcon Posts: 9,996
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    Thirty years ago, my late father set up a trust naming me as beneficiary. The trust consists of a life assurance bond and is worth about £35000. The trustees are now deceased. The provider initially indicated to me that payment would be forthcoming within a few weeks. However, it has more recently been making excuses to avoid payment. For example, amongst other things, it is now advising that it cannot pay the proceeds to me unless the trust is first registered with the inland revenue. I am not sure that this is correct.

    I’ve tried to do some research myself and it looks as if any obligation to register the trust, if applicable, would fall on the trustees, not the beneficiary. Also, as I am disabled there may be an exemption from registration, if indeed, the obligation to register is engaged by this type of trust.

    In addition to the above, it seems strange that I would be required to register the trust only to have it brought to an end immediately the payout is made.

    One thing I am absolutely sure about is that my father did not anticipate that I would have any difficulty securing payment upon his death, as he was advised that the proceeds would fall outside his estate and that no tax would be payable.

    Can anyone advise me please?


    Ask them to cite the precise legislation on which they are relying, and request a full written reply within (say) fourteen days. If you don't get a satisfactory answer, invoke their formal complaints procedure.
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • OP, registering a Trust with U.K. gov is fairly easy and free if you do it yourself.   Just Google “U.K. Gov registering a trust” and follow the guidelines.  One category is for life insurance policies.  The website says there is a penalty for noon registration by the deadline of 90 days of their creation.  I registered one 5 years after creation and have had no negative comeback, probably as there are no income producing assets (eg property or an insurance policy).  As the trustees are deceased, register them as trustees but after their name put the word deceased.  I also suggest that you obtain copies of their death certificates as a back up.  

    The above should tick the boxes for the insurance company.  Once the insurance company pays out on the policy you can then go back to the U.K. gov site to close the trust.  The paperwork you get confirming the encashmemt  of the policy should give most/all of the details needed to fill in the closure form.

    If unsure, you can anlways employ the services of a solicitor or accountant to do the work for you but expect to pay a couple of hundred pounds upwards per hour for the service.

  • OP, registering a Trust with U.K. gov is fairly easy and free if you do it yourself.   Just Google “U.K. Gov registering a trust” and follow the guidelines.  One category is for life insurance policies.  The website says there is a penalty for noon registration by the deadline of 90 days of their creation.  I registered one 5 years after creation and have had no negative comeback, probably as there are no income producing assets (eg property or an insurance policy).  As the trustees are deceased, register them as trustees but after their name put the word deceased.  I also suggest that you obtain copies of their death certificates as a back up.  

    The above should tick the boxes for the insurance company.  Once the insurance company pays out on the policy you can then go back to the U.K. gov site to close the trust.  The paperwork you get confirming the encashmemt  of the policy should give most/all of the details needed to fill in the closure form.

    If unsure, you can anlways employ the services of a solicitor or accountant to do the work for you but expect to pay a couple of hundred pounds upwards per hour for the service.

    Thank you so much for your reply. I guess I may be forced to follow your advice in order to receive my funds, but, as a matter of principle, I’m reluctant to register a trust that doesn’t need registering,
  • Marcon said:
    Thirty years ago, my late father set up a trust naming me as beneficiary. The trust consists of a life assurance bond and is worth about £35000. The trustees are now deceased. The provider initially indicated to me that payment would be forthcoming within a few weeks. However, it has more recently been making excuses to avoid payment. For example, amongst other things, it is now advising that it cannot pay the proceeds to me unless the trust is first registered with the inland revenue. I am not sure that this is correct.

    I’ve tried to do some research myself and it looks as if any obligation to register the trust, if applicable, would fall on the trustees, not the beneficiary. Also, as I am disabled there may be an exemption from registration, if indeed, the obligation to register is engaged by this type of trust.

    In addition to the above, it seems strange that I would be required to register the trust only to have it brought to an end immediately the payout is made.

    One thing I am absolutely sure about is that my father did not anticipate that I would have any difficulty securing payment upon his death, as he was advised that the proceeds would fall outside his estate and that no tax would be payable.

    Can anyone advise me please?


    Ask them to cite the precise legislation on which they are relying, and request a full written reply within (say) fourteen days. If you don't get a satisfactory answer, invoke their formal complaints procedure.
    The problem is that they can’t refer me to the Ombudsman quick enough. Even without me making a formal complaint, they referred me to the Ombudsman, knowing that it will take months to resolve. Meanwhile, they retain the money.
  • 30 years is a long time ago and taxation and trust laws have seen a lot of changes in that time. Some quite recent changes have required more types of trust to register with HMRC even ones where there will never be any tax to pay.

    When a trustee dies the surviving trustee(s) should get a replacement trustee otherwise you will end up with a neglected trust with no trustees to oversee it. If the trust needed to be registered but was for some reason it was not done it is going to cause this sort of issue.

    As seven hills said we need more information, who is the provider and what is the name of the product?
    The provider is Zurich, (formerly Eagle Star). The product is a life assurance investment bond held in trust for me as beneficiary. No solicitors were involved. Initially, they wouldn’t pay out because they said they needed to liaise with the coroner. They have now withdrawn that objection, but are now insisting that I need to register the trust.
  • 30 years is a long time ago and taxation and trust laws have seen a lot of changes in that time. Some quite recent changes have required more types of trust to register with HMRC even ones where there will never be any tax to pay.

    When a trustee dies the surviving trustee(s) should get a replacement trustee otherwise you will end up with a neglected trust with no trustees to oversee it. If the trust needed to be registered but was for some reason it was not done it is going to cause this sort of issue.

    As seven hills said we need more information, who is the provider and what is the name of the product?
    The provider is Zurich, (formerly Eagle Star). The product is a life assurance investment bond held in trust for me as beneficiary. No solicitors were involved. Initially, they wouldn’t pay out because they said they needed to liaise with the coroner. They have now withdrawn that objection, but are now insisting that I need to register the trust.
    It seems you have been caught out be recent HMRC changes. This quote is from Phoenix Life.

    Does Phoenix need to see evidence of registration?

    Yes, from 1 April 2023 HMRC are introducing requirements that mean trustees will need to provide evidence of trust registration at certain points during a policy’s lifetime. We will need to see proof before we can act on requests like putting a policy into trust, paying money out or accepting new money in.

  • Malthusian
    Malthusian Posts: 10,838
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    Thirty years ago, my late father set up a trust naming me as beneficiary. 

    It sounds as if the trust does need to be registered. The statement above that bare trusts do not have to register is not correct.

    If you are the only beneficiary of the trust, over 18 (16 in Scotland) and compos mentis, you are absolutely entitled to the funds and can wind the trust up. However, as that presumably hasn't been done yet, there was still a registrable trust in existence, even if it was rudderless after all the trustees died without being replaced.

    Bear in mind that there is a potential tax liabilty on the death payment.

    Were you under 18 when the bond was put into trust?

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