Mortgage endowment policy question: - divorce, death payout problems

kernow1

Right: some revelations for both of us. (Thanks again for the ongoing help, dunstonh!)
The court document DOES specifically refer to the endowment policy, this is apparently not the problem. It states:

All premium payments and...the full amount of the sum due on the maturity of the policy

should be paid by/to my mother.

There is no mention of death claims on the court document.

The endowment policy document states "lives assured".

The CIS response was as follows:

The wording of the order is quite vague in respect to the policy being transferred to you as part of your divorce...Normally these orders should state that the policy is to be Absolutely Assigned to the petitioner. However your court order states that Mr was required to "sign all and any necessary authorities in order to affect the receipt by the petitioner of this sum". ...In the absence of an Absolute deed of assignment or any other official confirmation that Mr was to be removed from the policy I would respectfully advise that it was correct that his name remained on the policy details....I am unable to advise why this (death) claim was never processed (CIS agents have left, considerable time passed...etc)...apologies for the stresss and delay caused to you

The deeds of the house were transferred entirely, as was the mortgage, but it was not enough for CIS?
This is obviously not my field, so I can't see how a document stating that my mother would receive full benefit and be fully responsible for the policy would also state that my father should have to sign something on maturity and remain on the policy.
The original solicitor apparently "can't understand it" and says that the document was "standard for the time".

A major concern for my mother if she cannnot convince CIS that a death payment was not appropriate is that she will not be reimbursed for the 8 years worth of payments to the Woolwich for a mortgage that should have been cleared in 1999.

Something to get your teeth into now? Thanks again!

dunstonh

The deeds of the house were transferred entirely, as was the mortgage, but it was not enough for CIS?

The property and mortgage can be changed very easily. The endowment is a tax wrapper containing an investment which was written a certain way which cannot be amended. It requires an assignment to be put in place which is bit like a trust document. It is straightforward but needs to be done correctly.

Can you verify if the policy is joint life? If it is, then I really cannot see a problem. If it was joint life and never assigned as CIS are saying then the other party on the life assurance (your mum) should be paid the proceeds.

kernow1

dunstonh wrote: »

The property and mortgage can be changed very easily. The endowment is a tax wrapper containing an investment which was written a certain way which cannot be amended. It requires an assignment to be put in place which is bit like a trust document. It is straightforward but needs to be done correctly.

Can you verify if the policy is joint life? If it is, then I really cannot see a problem. If it was joint life and never assigned as CIS are saying then the other party on the life assurance (your mum) should be paid the proceeds.

By the proceeds do you mean the full value on maturity or the death payment?
They are offering the death payment already, I am trying to work out if there is a case to answer for the policy continuing after the death of my father.

Dick_here

A policy can't continue after it has paid out on the death of one of the insured.

kernow1

!!!!!!_here wrote: »

A policy can't continue after it has paid out on the death of one of the insured.

Well, yes. But that's what the whole discussion is about - whether or not the policy should have paid out...

silvercar

Both mortgage and endowment policy were apparently transferred also to my mother alone

I read this as it being a joint life policy that was assigned to the mother.

Certainly when I took my endowment out in mid 80s they were written as joint life, payable on first death.

The original solicitor apparently "can't understand it" and says that the document was "standard for the time".

This and the fact that they are offering to pay out the sum assured and refund of payments from that date seems to suggest it was joint life. That CIS want to pay the mother suggests also that the policy was assigned to the mother.

The area of dispute seems to be whether the joint life, payable on first death policy should have been changed to a single life cover at the time of divorce or whether the divorce agreement assigned the existing policy to the mother as beneficiary.

It seems that CIS insist the latter and the mother feels the former.

Dunstonh will know more, but I would have thought that a payout of the sum assured plus refund of premiums would have produced considerably more than an endowment policy that has run its course. I am thinking along these lines because, at the time of death, the policy had many years to go. These endowments were usually set up with the aim of paying out the total sum assured after the full term so to do so 8 years before the end should be a higher payout.

Then you look at correcting the mistake that was made. I'm still running with the CIS assumption of joint lives, first death here BTW. You could argue that CIS have no way of knowing of the death unless they are informed, so there is no fault to be placed. Your mother obviously didn't think to tell them as she thought that the policy had been rewritten. Nevertheless, CIS have had the benefit of the premiums that have been paid in ever since the death, they have also had the benefit of the payout, (presumably within the with profits fund). Your mother on the other hand has still had to make mortgage payments on a mortgage that should have been cleared by the proceeds.

I would have thought it reasonable for CIS to make some sort of interest payment on both the payout and premiums, though it probably would not be sufficently high to cover all the mortgage payments since your father's death.

kernow1

Thanks silvercar, yes that's the situation.
I am not familiar with these endowment policies but my mother has always said (long before any of this trouble) that her endowment policy was meant to pay off the mortgage and give her a lump sum. I am not sure if this was a common practice, to over pay and have a sort of retirement sum along with it...
Judging by what my mother has told me from speaking to CIS, the difference in amounts due is considerable (much less if she receives the death payment).

The area of dispute seems to be whether the joint life, payable on first death policy should have been changed to a single life cover at the time of divorce or whether the divorce agreement assigned the existing policy to the mother as beneficiary.

This seems to be the case - but surely there must be a more defined regulation regarding this sort of thing than different interpretations of a court order?

As for the "reasonable" thing for CIS to do...presumably they are not obliged to give any sort of interest on over payment? Are there any regulations regarding this?

Thanks again for all your help!

EdInvestor

silvercar wrote: »

I would have thought that a payout of the sum assured plus refund of premiums would have produced considerably more than an endowment policy that has run its course.

Has the OP asked CIS for a surrender value of the policy right now?If he does this he may have a more realistic idea of what the policy is worth.

Just because his mother has paid X amount into the endowment over the years does not mean that the policy will be worth more now than the death benefit plus refund of recent premiums.

Sh could well be a lot better off by taking the CIS offer.

silvercar

I am not familiar with these endowment policies but my mother has always said (long before any of this trouble) that her endowment policy was meant to pay off the mortgage and give her a lump sum. I am not sure if this was a common practice, to over pay and have a sort of retirement sum along with it...

If you've got years to read up on whats been written about endowment misselling....start with the sticky threads on this board.

A lot of people were "sold" the idea of endowment mortgage under the impression that they would produce a large enough payout to cover the mortgage and leave a grand sum for holidays/ cars/ retirement...
(Trying to be balanced here and avoid this thread going off on a tangent) In practice endowments taken out in the mid 80s have performed variably, some have produced small surpluses others have been losers and left shortfalls on the mortgage. Endowment mortgages were usually a cheaper option as interest rates were higher in the mid 80s and there were tax savings through MIRAS that benefitted endowment mortgages.
Your parents may well have felt that an endowment mortgage would produce a surplus, lots of us thought that and are now looking to feel grateful if they repay our mortgages. Your parents may well have been encouraged to choose an endowment mortgage.

This really isn't the issue you are addressing now. As Edinvestor says, find out what the policy is likely to produce and compare that with what has been offered. I've not seen CIS quoted as a top of table endowment company so you may well be much better off with what has been offered.

Dick_here

silvercar wrote: »

I've not seen CIS quoted as a top of table endowment company so you may well be much better off with what has been offered.

Is this true, dunston ? How do their endowments rate ?