Advisers need to be helping trustees to review the trusts arrangements and in particular flagging if a policy is held through a relevant property trust (discretionary trust) that they will need to be filling a decennial return to HMRC.
If the value of the policies (which will be the higher of premiums paid or any surrender value) along with any other assets held through the trust exceeds the nil rate band for inheritance tax (currently £325,000), then on the balance over £325,000 6 per cent tax will have to be paid.
Many trustees and lives insured are not aware of this and the trustees need to plan for any tax that will have to be paid and consider how they will meet the tax charge when typically they have no liquid assets in the trust.
Many trustees will be holding policies that are approaching (or have been through) the 30-year anniversary of inception and if the premiums are more than £10,833 a year there will have to be a return made.
Insurer data and the client's adviser's data is frequently out of date with regard to current trustees and beneficiaries. Insurers will only pay out benefits to the current trustees on their system in the event of surrender/claim and in our experience there is more often than not a mismatch.
It may be as simple as a trustee having died (insurers will need to see an original death certificate) or new trustees having been appointed.
If the assets are earmarked for paying IHT and the cash will be needed in order for the executors to obtain probate, then a delay while the insurers records and the reality of the trustees is aligned, which can take months, is not advisable.
Paula Steele is a director of John Lamb Hill Oldridge
