Renewal of Index-linked Savings Certificates and death of holder query.

Pantile1

The latest information from NS&I advises of changes in the operation of Index-linked certificates one of which is the "No access during the term" rule.  The only informatiion given about the death of a certificate holder is if the holder dies, the Cerificate will become part of the Holder's estate and the Certificate will continue to earn index-linked growth and interest. 

Would this mean that if all of the rest of that estate was settled within a "reasonable" amount of time the estate couldn't be completely closed until the Certificate reached maturity - which could be a period of 2, 3 or 5 years.  There is nothing noted in NS&I's terms and conditions to indicate what would happen if the above situation happened.

xylophone

Below seems relevant


https://monevator.com/rolling-over-nsi-index-linked-savings-certificates/#:~:text=NS&I Index-linked Savings Certificates on death,be subject to Inheritance tax.

Certificates continue to earn tax-free index-linked growth and interest after death.

However, the Certificate falls into the estate of its last remaining holder upon their death and so may be subject to Inheritance tax.

Joint certificates continue to be owned by the surviving holder in the event of their partner’s death.

If you inherit an Index-linked Savings Certificate then it can be transferred into your name.

You should be able to claim the money instead if you so wish. See the NS&I form: Instructions to cash inIndex-linked Savings Certificates on this page. 

NS&I lists the information it requires after a bereavement on its website. It accepts photocopies of the original Savings Certificates.

x44

I can tell exactly what happens as an estate I was dealing with in the mid 2010's has NSI certificates.

NSI will cash in the certificate upon grant of probate being supplied to them without needing to wait until the certificate came to it natural maturity date.

This is exactly the same as for any fixed term saving type account with a bank /building society which also might be for 2,3, or 5 years.

In effect on death all "fixed term" type contracts cease to be valid. - also applies to say phone contracts - I as executor have cancelled these with immediate effect with no penalties for early cancellation being applied - just payment up to the date of cancellation.

For savings accounts the estate is paid interest up to the date of withdrawal by the executor. Depending on the size of the Estate and the time it takes to wind it up the estate might need to go a tax return for the interest accumulated post death up to the point of finalisation.

Also NSI will automatically continue to rollover the certificate to a new issue which is the default action anyway at the same duration as the maturing certificate if the certificate matures while the estate is being dealt with.

This will continue until the certificates are either cashed in or if they are transferred directly to a beneficiary.

Pantile1

Thank you xylophone and x44 - your responses are much appreciated and the information provided is very useful.

RobertinCambridge

i.l. certificates issued since 2023 have no provision for cashing before term. The user agreement does not specify fully what happens on the death of the holder. specifically....

1) can the value be assigned to Capital Taxes (to pay inheritance tax) before probate is granted?

2) can the executors cash the certificate before term.

(1) used to be a helpful feature and a good reason to hold savings certs: the executors pay the IHT with the certs without needing a bank loan. i.e. before the grant of probate.

xylophone

https://www.gov.uk/paying-inheritance-tax/deceaseds-bank-account

You can ask banks, building societies or investment providers to pay some or all of the Inheritance Tax due from the deceased person’s accounts. This is called the ‘Direct Payment Scheme’.

Investment providers can include: 

• National Savings & Investments (NS&I) 

And see responses above.

RobertinCambridge

thank you xylophone. yes  that is true, and the Direct Payment Scheme is indeed very useful. 

But the question remains as to whether nsi will allow recent (i.e. fixed term) savings certificates to be used for the Direct Payment Scheme.

xylophone

You should phone NS&I for definitive information but from the information in previous, the certs are fixed term accounts where the "contract" ends on death.

The funds fall into the estate of the deceased.

Other savings held by the deceased are similarly regarded.

Where the financial provider is part of the DPS, the savings may be used to defray IHT.

On this basis, it would appear that the certs may be so used?

RobertinCambridge

I read the contract with care but could not find a clause that terminated the contract at death. But maybe ordinary contract law requires that.

When I handled probate for a relative in 2003 i found the ability to transfer the savings certificates before the grant was very useful.  Now  of course  we have the DTS which is very helpful.

I want make things easy for my executors.

if i summon the willpower to ring NSI i will post the result here.

x44

To expand on what I said earlier in the thread...

I've always regarded death as an example of where the contract is legally "frustrated" - which is indeed a formal legal term for contracts.

This is where circumtances change such that the contract can never be completed/fufilled/continued no matter what either or both of the parties may or may not wish to happen - because of a permenant circumstances change outside their control made by an overiding authority.

Look up wikipedia frustration in English law

I suppose one example might be where HMG issues a lawful edict which prevents some person fullilling a delivery contract for something - though in practice the (very) small print of most contracts hidden at the end does cover this particular example by saying that government law may and can overide any contract provisons.

So as executor I've always regarded all contracts as null and void on death, and that sums held in some fixed rate account can be withdrawn without any penalty clause applied, service contracts with early penalty clauses can be terminated by the exeutor without penalty etc: regardless of what the T&C's of the contract say.  I've never yet had any push back from any company I've dealt with though its important to always find out and contact their breavement depts and NEVER the general call centre.  I have seen instances on the internet of trouble where the executor has contacted the general phone line and wanting to cancel on behalf of their dead relatives and the call centre trying to charge them full early cancellation fee.  To be honest as Executor I've always done as much as possible in writing by formal letter which leaves a proper paper trail - along the lines of Dear sir, X  of address Y is dead, copy death cert enclosed, I am the executor, please cancel all their services with you with immediate effect- your sincerely..end of!

In terms of generally getting the money it depends on the financial group and the amount of money in the accounts and the size of the estate. Some require full probate to be granted and copy supplied before they will payout, others just require the death cert, copy of the will and some form to be filled in/signed by the executor that acknolwedge their legal obligations to deal with the money received in accordance with the will. Frankly each financial group will have the own procedures and the last time I ended up with umpteen forms for each one.

Being an executor is a lot of work!

RobertinCambridge

thank you. that is very interesting.

i have already checked with my ISA provider and they confirm that they would pass the liquidated funds to the DTS before the grant of probate. I have left a printed copy of their email with my will.

best regards to all who have contributed to this valuable discussion.

Robert