Death in Service payment - can Trustees change who it is paid to?

Cacti24

Hi
My sister passed away last week after a long illness. She has left her estate (really just the equity in her flat) to be split equally between her 3 siblings. She had a significant death in service payment which she said would cover the remaining mortgage plus funeral expenses etc.
Prior to her diagnosis, she had written an expression of wishes to pay over the whole amount of the DIS to our mum, in the last 2-3 years, we had talked about how this wasn't the best idea from a IHT point of view (mum has a large estate, doesn't need the money etc). Sister said she had changed it to follow the will.

We have just heard from her employers that they only have the original expression of wishes, which they "legally have to follow". Is that the case closed?

Our mum is a fit 78, but wants the money to go directly to us as she already has a complicated estate, so if she were to go within 7 years, IHT on this money (which she would gift over to us immediately) would be a pain on top of everything else.

Can any body help?

sammyjammy

They probably can but I think its right they don't, although its inconvenient for your family at the end of the day she didn't change it and the trustees are respecting her wishes, they only have your word that this isn't what she wanted when she died.

So sorry for your loss.

Cacti24

Thank you for answering - it is useful to have an outside view

Even if my mum directly asks them to change the payment? And we show them the will? They did note she had asked for a new form last year, but they couldn't find it so she probably forgot to return it.

mebu60

The trustees are not obligated to adhere to the expression of wishes, it is a non-binding document. They don't have to 'legally' follow what is stated. However, they can choose that course of action for whatever reasons they decide. Equally they could deviate but may not want to set a precedent. 

Given they know your sister requested a new form it must be worth representation from your mother requesting the variation and setting out the financial reasons why she would prefer that course of action. Perhaps adding her (and everyone else's) belief that this had already been set up. There could be further IHT implications after 30 October! 

Marcon

Cacti24 said:

Hi
My sister passed away last week after a long illness. She has left her estate (really just the equity in her flat) to be split equally between her 3 siblings. She had a significant death in service payment which she said would cover the remaining mortgage plus funeral expenses etc.
Prior to her diagnosis, she had written an expression of wishes to pay over the whole amount of the DIS to our mum, in the last 2-3 years, we had talked about how this wasn't the best idea from a IHT point of view (mum has a large estate, doesn't need the money etc). Sister said she had changed it to follow the will.

We have just heard from her employers that they only have the original expression of wishes, which they "legally have to follow". Is that the case closed?

Our mum is a fit 78, but wants the money to go directly to us as she already has a complicated estate, so if she were to go within 7 years, IHT on this money (which she would gift over to us immediately) would be a pain on top of everything else.

Can any body help?

Was she employed in the public sector? If so, it's possible that this was actually a binding 'Nomination Form' rather than the EOW commonly found in private sector schemes/employment.

Otherwise no - an EOW doesn't normally have to be followed come what may. It would be unusual for trustees to stick slavishly to the form if the intended beneficiary can demonstrate they are of sound mind and want the payment to be made to other parties who qualify under the rules of any particular DIS scheme as potential beneficiaries. I'd suggest your mother goes back and makes a comment along the lines of 'in order to assist you with your due diligence before you exercise your discretion in reaching a decision...' and sets out what she'd like to happen and why. The whole point of an EOW is that it isn't binding - which is how the payment falls outside the IHT net.

sammyjammy said:

They probably can but I think its right they don't, although its inconvenient for your family at the end of the day she didn't change it and the trustees are respecting her wishes, they only have your word that this isn't what she wanted when she died.

So sorry for your loss.

...or failing in their due diligence, as the named beneficiary is clearly stating she doesn't want the payment to be made to her. Even if trustees have an up to date EOW, they are still required to carry out an appropriate level of due diligence - a pretty clear demonstration that just following the form isn't a given.

Cacti24

Thank you both - your replies are really helpful - having some wording to help my mum explain this is perfect. I feel if I call them, I'll sound like I'm trying to steal it from her (which I promise isnt the case)

Not employed in the public sector so not a "nomination form"

Marcon

Cacti24 said:

Thank you both - your replies are really helpful - having some wording to help my mum explain this is perfect. I feel if I call them, I'll sound like I'm trying to steal it from her (which I promise isnt the case)

Not employed in the public sector so not a "nomination form"

Trustees don't normally have to give reasons for their decision, but they can be required to explain the factors they've taken into account when reaching a decision.

It's important for there to be something in writing from your mother. That way, if the trustees 'decide' to follow the EOW, your mother can go back to them and point out that they have failed to 'take into account all relevant factors' and ask why such an important factor as her 'previous communication' has been ignored.

Having something in writing also gives the trustees confidence to take a decision which is at odds with the EOW - otherwise they could be in a position where the 'disappointed' beneficiary comes back at a later date and claims etc etc. Yes, it does happen!

Cacti24

Just to update the thread - Mum managed to speak to the CEO of the company (who is also a trustee) and he thankfully understood and has advised her to write a letter, send to him and he will make sure it is sorted.

I think the first Trustee just did a knee jerk reaction of "no - we follow the expression of wishes"

Thank you again to everyone - your replies helped convince mum it was okay to push back and get them to reconsider/listen properly to her