Spring 2005 Newsletter Content Home Sweet Pension Anything To Declare? Death And Taxes His And Hers Oh, Gross! We Didn't Mean It Agassi Wins Time To Go It Could Be Worse... Trivial Pursuit Re: Mortgages A Marriage Made In... Time's Money Show Business Scam Of The Decade? Gift Aid Vat's Hot! Wait For It A Good Buy? Know Your Articles Rights And Wrongs

Death And Taxes Of course, they are the two certainties. But it is possible to minimise the tax on death with a few simple measures. A recent tax case showed how it's possible to get it wrong. The big opportunity - and pitfall - is with insurance policies on your life. If you own the policy, and it pays out to your personal representatives when you die, the whole of that money goes into your death estate and the taxman takes a cut. There's really no point in that - after all, by definition you can't spend any of it. The alternative is to give the death benefit of the policy to a trust - either when you take it out for the first time, or at a later date, as long as it's at least seven years before you die. Then none of the money goes into your death estate for inheritance tax, even though the terms of the trust can be closely related to your Will. You can leave the proceeds of the policy to the same people who would enjoy it if it was paid to your executor. Death-in-service benefits are often provided by employers. The legal form is normally that the insurer will pay the promised amount to the personal representatives, but only 'at their discretion'. You are pretty sure that they will - unless your employer is untrustworthy - but neither you nor your executor can legally force them to do so. In that case, the money is available to pay out as part of your Will, but it doesn't get charged to tax. In the case, a British man worked for an American company - and the rules are different in America. It didn't look like a problem to them to just give him an insurance policy of which he was the beneficial owner. He nominated someone else to receive the proceeds on his death, but that wasn't the same as either of the above arrangements - just before he died, he could still have changed that nomination, and that was enough to bring it into IHT. It's worth checking that your insurance policies are outside the reach of the taxman. With luck, if you check, you won't need them anytime soon. We will be happy to help you do this. The case was heard before the Special Commissioners - Kempe & Roberts v CIR SpC 00424. It seems that this is most likely to be worth checking for an employee of an American company, but reviewing insurance and pension policies for their treatment on the death of the individual is a useful exercise. There certainly is no point in being the beneficial owner of death benefits under any such policy.