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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Got divorced couple of years ago and in the consent

Resolved Question:

hello
got divorced couple of years ago and in the consent order ex was ordered to transfer her legal and beneficial interest in our joint endowment policy to me
the policy is a 'qualifying' policy which matures on 1st may 2016
as my ex and i are on friendly terms we didn't bother getting a solicitor to draft a person to person assignment (why waste costs?)-she will simply instruct the life company to pay the entire maturity proceeds to me
my research leads me to believe that because the transfer of my ex's interest in the policy is pursuant to a court order no taxable event has arisen or will arise in respect of the said transfer
i further understand that the policy proceeds will be 100% tax-free in my hands
i would be grateful of you could confirm and also would you agree that her directing the life company to pay me solely is compliance with the consent order, albeit a couple of years late!
thanks in advancd
Submitted: 11 months ago.
Category: Tax
Expert:  TonyTax replied 11 months ago.
Hi. Can you tell me what sort of endowment policy it is please. Is it one where monthly payments were made into it with the intention to build up a fund to pay off a mortgage for example? If so, can you tell me how long it has been in existence and what the length of the terms was. Is it one where a single premium was paid and where 5% of the original investment can be withdrawn in each policy year tax free?
Customer: replied 11 months ago.
it was taken out in 1991 to repay a mortgage-albeit the mortgage was cleared years ago
so term of 25 years
low start policy, monthly premiums
Customer: replied 11 months ago.
one more thing-no change was made to the lives assured following divorce ie joint lives from start to now (don't know if that's relevant)
Expert:  TonyTax replied 11 months ago.
Thanks. The transfer from your wife to you as a result of the court order is not a taxable event. As the policy will run to term, the proceeds will not be taxable. See section 2 under the heading "Qualifying policies" here. The policy should have been transferred two years ago as you say in line with the consent order. Whether the insurance company will extend that to the policy proceeds at the request of your ex-wife I cannot say. It would be worth checking. They would want to see the consent order at the very least. I hope this helps but let me know if you have any further questions.
Customer: replied 11 months ago.
correction-mortgage was cleared last july (original mortgage redeemed many years ago-policy then assigned to new lender and mortgage with new lender was repaid last july)
Expert:  TonyTax replied 11 months ago.
That makes no difference to my answer.
Customer: replied 11 months ago.
Life company will pay me if she gives written instruction and i guess in hmrc eyes that represents 'assignment' (in addition to the fact that she's been ordered to transfer her interest to me)
Do you concur?
Expert:  TonyTax replied 11 months ago.
Yes, I do.
Customer: replied 11 months ago.
So in summary the fact that the various mortgages have been cleared prior to policy maturity is irrelevant and neither she nor i have any tax to pay in respect of the transfer and maturity of the policy?
Expert:  TonyTax replied 11 months ago.
The mortgages are not relevant. It's the fact that the policy ran as long as it did that makes the profit tax free.
Customer: replied 11 months ago.
great
and the no change of lives assured point doesn't change the tax position?
Expert:  TonyTax replied 11 months ago.
No, the policy proceeds are paid to the beneficial owner who may not be the life assured.
Customer: replied 11 months ago.
great stuff-many thanks
Expert:  TonyTax replied 11 months ago.
Thanks. Would you mind rating my answer before you leave the site please.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15840
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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