29 Apr 2019
We thought that this brilliant piece that first appeared in Cover Magazine was, with their permission worth sharing.
As the observant among you may have noticed, new fees to execute the will of the people, er, sorry, the will of a deceased person in England and Wales, have been delayed indefinitely. Among other things. The significantly increased rates were planned to come in on 1stApril. But again, the Government had us fooled, as there has been no time for parliament to agree on them being applied. Or not.
As previously discussed in Cover, the intended fees caused waves on a number of fronts, including the suggestion of increased liability for advisers failing to take reasonable steps to protect life policies from probate. A fair point. And in reality, more often likely to bite than IHT. But for the vast majority of people, the amounts at stake are relatively small. Compared to the alarming (but rarely relevant) 40% on an excess of value above the tax free thresholds, it’s peanuts. With average sums assured still well under £200,000, most often in place with a mortgage, just £500 can be expected to be the most common penalty for having the death benefit inside the estate.
No, the big worry is that the bereaved partner for whom the cover was intended gets nothing at all. A 100% loss of typically £150,000. Not because the claim is declined, but because the adviser didn’t ensure the policy was set up correctly. This is exactly what can happen to unmarried couples – and it’s heart-rending to see when it does. (No, the relatives don’t always play nicely and hand over the money anyway.)
We didn’t used to have to worry about this so much in the days when the most common practice was for couples to take out joint polices. Or if they took single life cover, at least most couples used to be married and intestacy rules saved them, or they might even have had a will.
But now, for many good reasons, more life policies are set up as single life than joint - over 70%, of term policies going from iPipeline’s figures on the rising trend over 2013-2017. Which is a big problem for the growing number of unmarried couples who don’t realise how important it is to get this cover set up right. Apart from Guardian with their easy Payout Planner solution, this means there has to be a trust AND at least one trustee – hopefully the partner.
Ruth Gilbert of insuringchange.co.uk is the author
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