IHT and care assessment

[Wellin]

Are investment bonds payable on second death with an insurance element typically fund value +1% assessible

1. For potential long term care home fees during your lifetime.
2. IHT on second death. Does it fall within the second estate.

Or is it necessary to make the bond payable to a third beneficiary on second death as it is an insurance bond.

Thanks in advance of your replies

[tax_schmax]

Generally speaking, contracts for life assurance with a surrender value, (such as the majority of investment bonds) and excluded from the value of an estate for purposes of assessing the personal contribution towards long term care.

For IHT purposes, the surrender value at the date of death is assessed as part of the estate of the deceased. The proportion taken into account in the value of the deceased estate will reflect their proportion of ownership. This is usually an equal split but need not be.

The deceased share of the value is included although the bond may still continue in the name of the surviving life assured. The lives assured need not be policy owners. On the last death, the policy will be automatically redeemed.

[Wellin]

Does this mean that even when a charge is taken against your estate for care that the bonds fall outside the estate.

On the first death is half the bond value attributed to that eastate for IHT

Thanks

[tax_schmax]

1. No. If a charge is put against your estate, it is a bill that needs to be paid from all assets. Life assurance bonds are only excluded from the assessment of how much an individual should pay toward their own care. They can still be used to meet a bill that is deferred until death.

2. An investment bond can have one owner and several lives assured. How many bond owners are there? If there are two, generally half the value is included in the estate at each death. The split can be adjusted but is generally assumed to be an equal split between policy owners, which could be 4 or more.