Does a pension form part of someones estate if they die without a Will?

[NotActuallyAMum]

My BIL is terminally ill and he hasn't written a Will because both he and my sister say he doesn't need one as he hasn't got anything to leave but I'm worried for my sister because he's got a very good pension from which she will get a lump sum upon his death then an amount per month

I've read that the 'automatic' amount that a spouse inherits is £250k, but what will happen if the pension is worth more than that? Will it matter? I've no idea of the value of it

I do of course realise that it's none of my business but they've involved me in a few things because I'm her "back up" to make phone calls/sort things out when she loses him just in case she's not up to doing it

Any help would be much appreciated

[exexpat]

Not a lawyer or an expert - think you might need to put a shout out for Mumblechum who is the resident MN wills expert - but I think if the pension is set up so that there is a spouse's pension/lump sum on death, as long as they are legally married, your sister should get it whatever the amount. You would have to check the pension documents.

Likewise if there are any life insurance policies which specify that the surviving spouse is the beneficiary. The £250k is for general property/money that doesn't have any strings attached to it. One thing to check - do they own their own house? And if so, is it owned as joint tenants (in which case your sister will automatically inherit his share) or tenants in common, in which case he could theoretically leave it to anyone.

Basically, it would be a very good idea to draw up a will anyway, because it makes everything much, much simpler to deal with when it comes to probate. Doesn't have to be complicated or expensive to do, and will save more than that in lawyers fees afterwards.

[mumblechum1]

Hi there, yes, money held in a separate trust, ie an insurance policy, goes to the spouse irrespective of the amount. Agree also with exexpat that the BIL should check how the house is held. It's very easy to do that, he just pays £4 to the Land Registry for office copy entries. If the house is held as joint tenants then the wife will automatically inherit the husband's share but if not then he should really make a will esp. if his share of the equity (and of course the mortgage may be covered by insurance), is more than £250k.

I agree that he should do a will (well, I would, I'm a will writer), apart from anything else if they have children because it would be sensible to appoint Guardians just in case the unthinkable happens and both parents die.

[prh47bridge]

Pensions and life insurances are normally written in a way that ensures the money does not form part of the deceased's estate.

The intestacy rules are not as simple as saying there is a £250k limit.

Your sister will inherit all your BIL's personal belongings.

If he has no surviving descendants (children, grandchildren, etc.), parents, brothers, sisters, nephews or nieces, she will inherit everything.

If he has surviving descendants she will get £250k plus a life interest in half the rest of the estate. A life interest means she cannot spend or get rid of that part of the estate but she is entitled to the benefit of it during her lifetime.

If there are no surviving descendants but there are parents, brothers, sisters, nephews or nieces, your sister will get £450k plus half of any amount over £450k.

[prh47bridge]

Cross posted with Mumblechum1. But I agree he should sort out a will.

[NotActuallyAMum]

Thank you so much for your quick replies

That's such a relief that his pension won't form part of his estate

No property (they rent) and their 3 'children' are adults, albeit young ones

Does he still need a Will do you think? To be honest, from what they've both said I think I'm going to struggle to convince them that it's a good idea, and of course it's their choice, so I'm really hoping they'll be OK without one

[NotActuallyAMum]

Crossed posts PRH but thank you too

[zipzap]

Isn't it will aid month this month?

Think it means that you can do a will for free at some solicitors but you give a donation to a charity - not sure if it has to go to a specified charity or if it has to be as much as if they had charged you the full price for doing it.

But could you persuade your bil on grounds that it will be a lot less grief for your sis once he has gone if he has a will as there won't be as many forms and things to fill out (not sure if this is the case but it feels like it should be; hopefully the people on here that know can advise) plus if he'd like to leave something special to each child or to old friends etc then it would be a nice way to do it.

It might just help as an administrative task in so far as it will get him to sort out all his accounts and pension info do it is all there and easy for afterwards. Plus if she does a will at the same time isn't there something about being able to share the limits so that even if he doesn't need to use it now, she could later? Again not my area but they were talking about it on the news a while back. Not sure if she could do this if he hasn't written a will.

[emsyj]

Normally death benefits from a pension scheme are held in trust and are paid out at the discretion of the trustees. This ensures that the value of the benefits is outside the estate for IHT purposes. You can normally do an expression of wish form saying who you would like to get it (e.g. spouse, children or whoever) but it isn't binding on the trustees (although they normally follow it unless there's a reason not to - e.g. the scheme member filled it in years ago and their circumstances have changed dramatically).

Sometimes the member has a power of nomination to determine who gets the death benefits, although this is more unusual as it brings the value of the benefits within the estate for IHT purposes. In these circumstances, the member nominates who is to get it and it is paid out to them.

In neither case would a Will or the intestacy rules have any effect.

Contact the trustees of the pension scheme and ask them how the benefits will be paid out on death.

The lump sum is different from the spouse pension, which will be paid to the legal spouse as of right under the rules of the pension scheme. I think mumblechum's post is misleading in that it seems to suggest that the spouse will always get the lump sum automatically, which is not correct.

It will be much easier to administer the estate if there is a Will. It only needs to be a very simple one if he wants everything to go to your sister. Get him to sort it out!

[mumblechum1]

emsyj, no, I meant the wife will get the lump sum in this particular case assuming she's named as beneficiary.

If the insured person is unmarried/divorced, they'll usually nominate the children or other person as beneficiary.

[emsyj]

I am also making an assumption here that the payment on death will be a death in service payment (on yet another assumption that your BIL stopped work due to illness) or a death in deferment payment - and not a guarantee payment that would be made post-retirement. There are different tax rules applicable to payments made out of pension schemes following retirement and the amounts are restricted.

Lots of assumptions going on!!!

If you want to find out more about the scheme (if it is a big scheme then just name it as large pension schemes often have websites for members that contain the rules or guides to the rules) and tell us your BIL's age and the circumstances then you can get some more precise advice.

In real life, mumblechum, when a member is divorced they don't nominate the children - in fact in 99% of cases they don't bother changing their expression of wish form at all, so that there is a huge hoo-ha after the death with the scheme trustees ringing up in a panic over who to pay as they are receiving daily phone calls from the ex-spouse (still nominated on the form), the children and the new partner. Sometimes you even get forged expression of wish forms fabricated by the new partner and every now and then a sly ex-spouse who tries to get the payment made before the scheme trustees even find out that the deceased was divorced.....

It's all fun and games in the world of pensions, you know.

[mumblechum1]

emsyj

I'm forever telling my divorce clients to remember to change the nomination, who knows whether they ever get around to doing it.

Sounds like your job (assuming you're in pensions) is even dirtier than that of divorce lawyers!

[emsyj]

Thankfully not any more - used to be a pensions lawyer in the City but now am private client in a small firm and it is much less stressful and more interesting.

The case of the forged expression of wish was quite scandalous though, so exciting in its own way!!!

[NotActuallyAMum]

Thank you all, I really do appreciate your free legal advice

They have already been in touch with the pension provider and they have said that my sister will get a lump sum then a monthly amount. She is definitely named as the person who will receive the money, he has made sure of that

emsyj he has cancer, he's been ill (and yes, not able to work) for almost 2 years now but he's getting worse by the day unfortunately. He's only 50, my sister is 42 which means she's too young for a 'state' widows pension. He paid into this pension for over 20 years whilst working for a large brewery which was later sold to another brewery

[EFD]

Hi - agree with combined responses of emsyj and mumblechum1 (I am a pensions lawyer).

One other thing to consider - some pension schemes will allow a terminally ill person to "cash in" the pension they could have expected if they had a normal life expectancy and get a one-off cash amount instead. If that is available, then it may also be the case that the pension for your S would still be payable after BIL's death. However it would almost certainly affect the lump sum payable on your BIL's death so it's a balancing act as to what the best option is.

If the pension provider didn't mention this when contacted (its often referred to as a serious ill-health lump sum) then it might be worth getting back in touch to check whether this is an option, and what the impact on benefits paid after his death might be.

[legalduck]

Hello all I have not had time to look at the thread. However, if you or anyone else has any doubts DO A WILL As mentioned, it is not simply your wealth that is dealt with but also funeral arrangements guardianship for children, property, and pensions. On pensions, life policies and death in service benefit etc. it is important to make sure that the person nominated ids the right person to benefit.

I like so many other lawyers I see people all the time who are dealing with the estate of a loved one who has not made even a simple Will. To do a Will is very cheap and involves just a little thought. It will remove a great part of the stress from you and your relatives in the period before the inevitable and beyond. It will also ensure that your estate is dealt with quickly and efficient