Inheritance/Life insurance question

[tenohfive]

Hope someone can explain this too me. My MIL is due to receive a payout from a life insurance bond after her husband passed away from cancer. She's due to be paid £16K, but has been told she'll be losing £5K of that in tax.

That seems pretty high to me - is that normal? There are no other assets passing over, everything else was owned jointly by them.

Is this excessive or is this normal?

Thanks

[tenohfive]

musclecarmad said:

tenohfive said:

Hope someone can explain this too me. My MIL is due to receive a payout from a life insurance bond after her husband passed away from cancer. She's due to be paid £16K, but has been told she'll be losing £5K of that in tax.

That seems pretty high to me - is that normal? There are no other assets passing over, everything else was owned jointly by them.

Is this excessive or is this normal?

Thanks

seems high

is she a higher rate taxpayer or basic rate

basic rate tax is deemed to be settled in the fund so on encashment any gains that make you a higher rate taxpayer etc are charged at 20% of the gain - there is something called topslicing but im keeping it simple

so, yes it seems high.

is it a with profit bond and is there an MVR applying

pm me if you wish

Basic rate tax payer (works part time.)

As for with profit or not...I don't know. I'll have to ask the MIL tomorrow. And I don't know what an MVR is?

[sidicks]

musclecarmad said:

is it a with profit bond and is there an MVR applying
pm me if you wish

Unlikely to be an MVR payable on death!

Sidicks

[Tiggsy]

makes no sense - if the payout is due to him being the life assured then no MVA would apply....and its not higher rate tax as its too much. You need to find out what the tax is...just ask them!

[skeeterm5]

If it was a whole of life policy rather than term then i think the proceeds are free from income or capital gains tax but as they are paid to an estate are liable for inheritance tax

S

[Tiggsy]

yes - no tax on a whole of life plan but the proceeds (if not in trust) would go to the spouse where no IHT is applied (and nowadays IHT is a non-issue for most poeple anyway...unless they have estates up towrads 1m)

[tenohfive]

Cheers for the replies. Will pass that on to the MIL and get her to ring up and try to get to the bottom of it.