How should the proceeds of an insurance plan placed in Trust be divided?

[hiriskpaul]

I have been granted Probate for a relative's estate and he had an insurance plan which was placed in Trust. The insurance company says there were 3 named beneficiaries to the plan, but no indication as to how the money should be divided between beneficiaries. Both Trustees to the plan are now dead, but all 3 beneficiaries survive. It now falls to me to act as Trustee and distribute the proceeds.

The Will of the deceased splits the estate 60/20/20 between the same 3 beneficiaries. Should I split the insurance plan the same way as stated in the Will? I have great difficulty with that as I do think it unlikely that my uncle actually intended to split his whole estate that way. This is because at the time of the Will, my uncle owned 3 houses. 2 of those were subsequently given to one of my cousins (the one getting 60%). So although no-one has challenged the Will, I suspect my uncle would have wanted to split his remaining estate more evenly after giving away 2 of the houses. I have not discussed this yet with any beneficiaries.

I would much prefer to split the Insurance plan equally between the 3 named beneficiaries.

ps Several years ago my uncle also transferred the bulk of his other investments to the cousin getting 60%.

[swill453]

I guess you don't have a choice in splitting the estate 60/20/20, despite the main beneficiary having had a wodge in the deceased's lifetime.

One might consider that splitting the insurance proceeds equally would redress the balance a little.

Scott.

[scrumpyjack]

The deceased could have instructed the insurance company on the percentage division, but he didn't. You could get into trouble if you don't split it equally. It is not part of the estate and so is not subject to whatever instructions are given in the Will for the division of the estate.

If in doubt get legal advice, unless it is a trivial amount.

[hiriskpaul]

The deceased could have instructed the insurance company on the percentage division, but he didn't. You could get into trouble if you don't split it equally. It is not part of the estate and so is not subject to whatever instructions are given in the Will for the division of the estate.

If in doubt get legal advice, unless it is a trivial amount.

The amount is about 8% of the size of the estate, but is not trivial. My instinct is to split equally. I think I am on fairly firm grounds doing that, unless someone knows otherwise, and it goes a little way into redressing the balance.

I know my uncle wanted to review his Will, but he died before he managed to.

[pochisoldi]

The Will of the deceased splits the estate 60/20/20 between the same 3 beneficiaries. Should I split the insurance plan the same way as stated in the Will? I have great difficulty with that as I do think it unlikely that my uncle actually intended to split his whole estate that way. This is because at the time of the Will, my uncle owned 3 houses. 2 of those were subsequently given to one of my cousins (the one getting 60%). So although no-one has challenged the Will, I suspect my uncle would have wanted to split his remaining estate more evenly after giving away 2 of the houses. I have not discussed this yet with any beneficiaries.

I would much prefer to split the Insurance plan equally between the 3 named beneficiaries.

There's some overthinking going on here.
The executor is trustee for the estate.
The trustee for the insurance policy is the insurer.

All that is required is for someone to notify the insurer and for the insurer to pay out according to the expression of wish they have in hand.
The only reason why the executor gets involved is because they probably have all the required docs/info (e.g. current addresses for the insurance beneficiaries) and it just makes sense for them to handle this aspect of the deceased's affairs.

Once the insurer has all the required info, it's tick the box and move on.

Pochisoldi

[hiriskpaul]

The Will of the deceased splits the estate 60/20/20 between the same 3 beneficiaries. Should I split the insurance plan the same way as stated in the Will? I have great difficulty with that as I do think it unlikely that my uncle actually intended to split his whole estate that way. This is because at the time of the Will, my uncle owned 3 houses. 2 of those were subsequently given to one of my cousins (the one getting 60%). So although no-one has challenged the Will, I suspect my uncle would have wanted to split his remaining estate more evenly after giving away 2 of the houses. I have not discussed this yet with any beneficiaries.

I would much prefer to split the Insurance plan equally between the 3 named beneficiaries.

There's some overthinking going on here.
The executor is trustee for the estate.
The trustee for the insurance policy is the insurer.

All that is required is for someone to notify the insurer and for the insurer to pay out according to the expression of wish they have in hand.
The only reason why the executor gets involved is because they probably have all the required docs/info (e.g. current addresses for the insurance beneficiaries) and it just makes sense for them to handle this aspect of the deceased's affairs.

Once the insurer has all the required info, it's tick the box and move on.

Pochisoldi

Instructions the insurer had was to pay the trustees for the benefit of the 3 named beneficiaries. I have been paid.

[chas49]

I have been granted Probate for a relative's estate and he had an insurance plan which was placed in Trust. The insurance company says there were 3 named beneficiaries to the plan, but no indication as to how the money should be divided between beneficiaries. Both Trustees to the plan are now dead, but all 3 beneficiaries survive. It now falls to me to act as Trustee and distribute the proceeds.

I would hope the ins co have paid to you as trustee because the trust deed had some fallback clause saying that the executor(s) of his will would become trustees of the plan if the original trustees have deceased. Without such a clause, if all the trustees have died, the Personal Representative of the last trustee to have died will have the right (once probate is obtained) to appoint a new trustee. Once that is done, the new trustee will be able to administer the trust according to the terms of the trust.

In summary, assuming you are the new trustee following this process, you follow what the trust deed says. If the deed is silent on the shares, and there's no expression of wishes letter to guide you, I suggest the split is at your discretion as trustee of the trust. Your role as executor of the estate is separate.

(IANAL)

chas49

[scrumpyjack]

I as executor in an extremely difficult family situation a few years ago received the proceeds of a pension policy from the Insurer, Standard Life. They told me they had taken legal advice and based on that were handing over the proceeds for me to do whatever I thought appropriate at my absolute discretion.

So I would say if the insurer has handed over the cash to you, you then have the discretion to distribute it in whatever manner you feel appropriate among the named beneficiaries.

(Again IANAL)

[yorkshirelad1]

I have been in a similar situation with an insurance policy in trust where the sole trustee died and I was sole exor for the deceased.
My take on it is:
If a trustee has died, then their personal representatives (exors) become the trustee.
The assets of the (in trust) insurance policy belong to the trust, and should be dealt with by the trust deed, not the Will.
IANAL (I suspect one may be along shortly)

[dionaeamuscipula]

I have been in a similar situation with an insurance policy in trust where the sole trustee died and I was sole exor for the deceased.
My take on it is:
If a trustee has died, then their personal representatives (exors) become the trustee.
The assets of the (in trust) insurance policy belong to the trust, and should be dealt with by the trust deed, not the Will.
IANAL (I suspect one may be along shortly)

It's not quite clear if the trust was discretionary, with an expression of wishes. In my limited experience plans like this usually are, to keep the proceeds out of the estate for IHT reasons. If it was, the trustee has absolute discretion to act, and can ignore the expression of wishes if they so determine, although I expect it is rare to do so. If this is the case, the OP can do whatever they want (within reason,presumably).

If it is not the case, then the OP should follow whatever is laid out in the trust deed.

If the trust deed is silent on the matter or the instructions are unclear because the beneficiaries are named but not the proportions, then I would be taking specialist advice.

But IANAL either, and this is an area of law where there is plenty of legislation that could trip up a barrack room amateur.

DM

[hiriskpaul]

I have been granted Probate for a relative's estate and he had an insurance plan which was placed in Trust. The insurance company says there were 3 named beneficiaries to the plan, but no indication as to how the money should be divided between beneficiaries. Both Trustees to the plan are now dead, but all 3 beneficiaries survive. It now falls to me to act as Trustee and distribute the proceeds.

I would hope the ins co have paid to you as trustee because the trust deed had some fallback clause saying that the executor(s) of his will would become trustees of the plan if the original trustees have deceased. Without such a clause, if all the trustees have died, the Personal Representative of the last trustee to have died will have the right (once probate is obtained) to appoint a new trustee. Once that is done, the new trustee will be able to administer the trust according to the terms of the trust.

In summary, assuming you are the new trustee following this process, you follow what the trust deed says. If the deed is silent on the shares, and there's no expression of wishes letter to guide you, I suggest the split is at your discretion as trustee of the trust. Your role as executor of the estate is separate.

(IANAL)

chas49

That is a spot on description as to what has happened. I tried to get the insurance company to give their opinion as to how the proceeds should be divided, but they would give no opinion. They told me that as far as they were concerned, they have now discharged their obligations over the policy. I got the sense they did not want to get involved in what could be a thorny issue. How the policy proceeds should be divided has never been any of their business and they are not going to get involved now.

As I understand it, how the trust proceeds are divided is entirely up to me at this point. What I am looking for is what would be the normal thing to do in this situation, assuming there is a normal! I think I have a choice between dividing equally and dividing according to the will (as the only available written evidence of the deceased wishes). I cannot really justify dividing any other way.

[swill453]

As I understand it, how the trust proceeds are divided is entirely up to me at this point. What I am looking for is what would be the normal thing to do in this situation, assuming there is a normal! I think I have a choice between dividing equally and dividing according to the will (as the only available written evidence of the deceased wishes). I cannot really justify dividing any other way.

Bear in mind you only know of the 60/20/20 split in the will because you are the executor. This wouldn't have been the case if the original trustee(s) had still been alive.

On the information they would have had to hand, there would have been no reason to split any way other than equal shares, this presumably being the intention of the deceased in the absence of any other instruction.

Scott.

[hiriskpaul]

As I understand it, how the trust proceeds are divided is entirely up to me at this point. What I am looking for is what would be the normal thing to do in this situation, assuming there is a normal! I think I have a choice between dividing equally and dividing according to the will (as the only available written evidence of the deceased wishes). I cannot really justify dividing any other way.

Bear in mind you only know of the 60/20/20 split in the will because you are the executor. This wouldn't have been the case if the original trustee(s) had still been alive.

On the information they would have had to hand, there would have been no reason to split any way other than equal shares, this presumably being the intention of the deceased in the absence of any other instruction.

Scott.

Good point. Thanks.

[Chrysalis]

IANAL but I have dealt with the division of policy proceeds held in trust after a relative’s death. I would have thought that equal shares is the default, in the absence of evidence to the contrary (and I don’t think the will counts as evidence in relation to the trust).

[dionaeamuscipula]

As I understand it, how the trust proceeds are divided is entirely up to me at this point. What I am looking for is what would be the normal thing to do in this situation, assuming there is a normal! I think I have a choice between dividing equally and dividing according to the will (as the only available written evidence of the deceased wishes). I cannot really justify dividing any other way.

I don't think there is a normal. "Normal" would include an expression of wishes that included a wish as to the proportions, which you could follow. But even with that, your discretion would be absolute. Splitting as per the will or dividing equally are just two of your choices. You could also follow the rules of intestacy, since that is the government's view of what is fair to do when there are no clear instructions.

Clearly though, you wish to do what is "right" under the circumstances. Since there is no "right", you can only do what you think is best. Be guided, as you suggested, by the opinion of the beneficiaries, but make it clear you will make up your own mind. Document your reasoning, so that you can validate your decision in the future if necessary.

And if in any doubt, spend a few quid on a decent solicitor.

DM

[hiriskpaul]

Thanks to everyone for their replies. All very useful in helping me think this through.

One thing has occurred to me regarding the policy. I think one of the selling points of these whole of life policies is that they can be paid out quickly after someone dies, as the money is not part of the estate and so not subject to IHT, the long winded probate process, etc. All very well, but it failed in this instance as the deceased was the last surviving trustee. So anyone with one of these policies should really ensure there is at least one other trustee at all times, preferably two.