Taxation of Investment Bond Gains - Policy owner = exactors of estate

Hi all,

A bit of a weird one...

Our client holds an Investment Bond. The Policy Owner is Mr xxx (Dec'd) & Mrs XXX as Executors of Mrs xxx (Dec'd)(mum). So basically the policy holder of said bond are the executors the estate of an individual who died 3 years ago. Mr xxx has just died and he was the remaining life assured and therefore the bond ends and we have a chargeable event certificate.

By question is, how do we declare the gain and who pays the tax?

Any help or pointers would be greatly appreciated!

Thank you :-)


  • To start you need to see the Will of the deceased from 3 years ago - you need this to understand in what capacity the 'policy holders' are working in - executors or trustees.
    I suspect trustees in which case the Will gives you details of the trust from which you can then establish what type of trust it is.
    Chances are it is a discretionary arrangement in which case the chargeable gain / tax is assessed on the trust at trustee rates of tax.
    On the other hand if not a trust is in the Will then you open the can o wors as regards who should have taken ownership of the asset under the Will in the first place (hopefully that is not a scenario you need to deal with.)

  • Hi Richard,

    Thanks so much for responding. Basically the client and her father administered the estate of the mother and when asked by the bond provider asked who should be the owner - the executors agreed that they should (as executors) and they signed forms to this effect. I understand that the client and siblings would have benefitted from the will.

    The bond provider has confirmed this is not in trust.

  • The bond provider won't be of any help on this. They are confirming something they cannot possibly know without reading the Will and only then if they have recorded it correctly on their database. I suspect they only asked for a copy of the Grant of Probate to confirm ownership transfer t the executors. Other than that the life office cannot know what the legal structure is behind the ownership.

    It is the Will that dictates the position of the bond. Without seeing this we are just guessing the answer and cannot provide a definitive answer to your client.

    It is the late mother's Will you have to see in order to answer the tax question. You can either get this from the client or, for a small fee, you can get a copy from the Will register online.

  • Thanks Richard. I will get a copy of the Will and review this.

  • Hi Amela,
    Also, adding some clarity to my last post, the reason I said “How would the provider know” regarding a trust is due to generally poor training and / or experience and understanding of executorship / trusts etc.

    By definition of the role, an asset is held by an executor for the benefit of one or more beneficiaries ergo a trust has been created. The nature of the trust (and hence the tax position) is dependent on the wording of the Will.

  • Hi Richard,
    I have got a copy of the Will.

    This says i give xxbond to my trustees to hold on trust for the benefit of all or such one or more exclusively of others or of my husband and my children an remote issue whether living at my death or born thereafter in such shares and in such manner for such limited or other interest as my trustees (being at least two in number or a trust corporation) shall in their absolute discretion appoint by deed or deeds of revocable or irrevocable and executed at any time or times not later than 79 years after the date of my death and in default of appointment or so far as no such appointment shall extend for the benefit of my said children in equal shares.

    does this help?? I cannot see an accompanying letter of wishes or will trust document.

    Really appreciate your thoughts.

  • Yes, this does help.
    You have a discretionary Trust. The wording is clearly creating a discretionary trust.
    Chargeable gain taxed to Trustees at Trust Rate.

  • Thanks so much Richard. So, what if there was no other trust (deed) set up? All we have is this paragraph in the will? Basically, the executors signed paperwork with the bond provider to change the policy ownership from the deceased to Mr XX and Mrs XX as executors of the deceased Will.

    We have no letter of wishes or any additional trust deeds to support this.

  • The Will created a discretionary trust and the bond is in it. There is no need for an additional trust deed.

    It looks like there is a bond, originally owned by Mrs A (mum), with lives assured of Mrs A and Mr A (husband). Mrs A died 3 years ago, and that bond passed into a trust created by her Will, for the benefit of Mr A and her children, at the discretion of the trustees. The executors (Mr A and Mrs B - their daughter, your client) are assumed to be trustees, the Will should confirm this in a clause defining the trustees.

    Mr A has just died. As the last remaining life assured, the bond now pays the proceeds to the trustees. The trustees are liable for any tax due.

    The residual cash can then be distributed to beneficiaries or held for a future date, either in cash or reinvested.

    Richard's gut feel in his first reply was correct, confirmed by sight of the clause in the Will.

    You should also advise Mrs B to appoint an additional trustee.

    Benjamin Fabi 
  • Thanks so much Ben and Richard. This has been so helpful.

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