Joshua Wynn - 19/02/2019
‘Fear may be defined as a pain or disturbance due to a mental picture of some destructive or painful evil in the future… we do not fear things that are a very long way off: for instance, we all know we shall die, but we are not troubled thereby, because death is not close at hand.’
– Aristotle, Rhetoric.
A time when we will no longer be around to bring light to the world and rapturous glee to our many friends can seem far off, like an intercontinental flight going on and on, that is, until we suddenly find ourselves beginning to descend. Our final shuffle off the mortal coil is something few of us see coming.
So, obviously you’re now thinking ‘What about those eight and ten-year structured products I’ve invested in? What will happen to them when Atropos cuts the slender thread of my life?’, or words to that effect. Fear not, for even at the bottom of Pandora’s jar of sorrows there was hope. In this article I will explain what will happen to your structured investment holdings when you’re no longer around to enjoy your ISA allowance.
There are some variations form provider to provider, but on the whole, they are legally bound to follow certain similar procedures, which are outlined below.
What Will Happen?
In the event of death during the term of a structured investment of which there is only one sole holder, a probate valuation will be taken to value the plan as of the date of death. The plan can subsequently either be cashed-in at its then market value, or ownership can be transferred to a designated beneficiary. For jointly held plans, they will typically be transferred to the sole ownership of the survivor, but in all instances will be dealt with in accordance with the instructions of the executor of the deceased’s will and as part of probate and administration.
In the case of some structured deposits, the beneficiaries can be certain that the surrender value will be at least equal to the value of the original capital, as a deposit is designed to protect this. However, some providers (such as Investec) state that if the deceased was over seventy-five years old on the plan’s start date, they will repay the market value of the plan (determined by them), which may be lower than the value of the original capital.
In all cases, the total value of the plan at date of death will form part of the deceased’s estate for inheritance tax purposes
Costs
Below is a table which explains the various mid-term death-related cost policies of providers.
| Cost/Provider | Probate Valuation | Beneficiary Transfer Fee | Surrender Charge |
|---|---|---|---|
| Dura | Nil | Nil | Nil |
| Hilbert | Nil | Nil | £100 |
| IDAD | £50 | Nil | £100 |
| Investec | Nil | Nil | Nil |
| Mariana | £50 | Nil | £200 |
| Meteor | Nil | Nil | Nil |
| Reyker | £50 | Nil | 0.5% (£150 Minimum) |
| Société General | Nil | Nil | £90 |
| Tempo | Nil | Nil | Nil |
| Walker Crips | Nil | Nil | £90 |
There are some nuances to every provider’s approach when a client passes away. The best advice we can give is to make sure these terms (which are outlined in all product brochures) are understood for each plan you or an estate you are responsible for may hold.
And now, to lead us from these mortal musings, some conclusive candor from the founder of the materialist school of Epicureanism:
‘Non fui, fui, non sum, non curo.’
(I was not, I was, I am not, I don’t care.)
– Epicurus
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