How to complete IHT410: life insurance, investment bonds, and annuities for Inheritance Tax

A policy 'written in trust' means the policyholder placed it into a legal trust at the time of taking it out (or later).

The trust owns the policy; the policyholder's estate does not.

When the policyholder dies, the proceeds are paid to the trust beneficiaries directly.

The executor has no role in claiming the money, and HMRC has no IHT claim over it.

Do not include these policies on IHT410.

Contact the insurance company and ask: 'Was this policy written in trust? If so, can you provide a copy of the trust deed?'

Policies in trust typically have: a trust deed or 'expression of wishes' form on file; named beneficiaries who are not 'the estate'; a reference to 'trustees' in the policy schedule.

If the insurer has no trust documentation and the policy simply names the estate or personal representatives as beneficiary, it is not in trust.

Any policy that was not placed in trust pays to the estate.

The executor claims the proceeds (with the Grant of Probate) and the payout is an estate asset for IHT.

Policies commonly not in trust: mortgage protection policies (many older ones), endowment policies, income protection policies with a death benefit, and older whole-of-life policies taken out before trust planning became standard.

A joint life policy (on two lives) typically pays on the first death to the surviving life assured, not to the estate — this is a contractual right under the policy, not a trust.

The payout goes to the survivor directly.

Only if both lives die simultaneously (extremely rare) would the estate receive the proceeds.

Do not include a joint life policy on IHT410 unless there is an unusual provision making it payable to the estate.

The surrender value of the bond at the date of death.

Contact the bond provider (often an insurance company such as Prudential, Aviva, Royal London, Standard Life, or an offshore provider such as RL360 or Zurich International) and request a 'death valuation' — the value as at the date of death.

They will provide this in writing.

Some bonds also pay a death benefit uplift (typically 1% of the fund value) — include the full amount including any uplift.

Onshore bonds (UK-based): any investment growth has had basic-rate income tax paid within the fund.

When the estate eventually encashes an onshore bond, there may be a chargeable event gain — but in an estate context, the executor and then beneficiaries are taxed on any gain above the 5% annual withdrawal allowance.

Report the full surrender value on IHT410.

Offshore bonds (Isle of Man, Ireland, etc.): no tax has been paid within the fund.

The full surrender value is reported on IHT410.

Any gain on encashment is income for the beneficiary.

Many investment bonds are structured in segments (for example, 100 segments of £1,000 each, total £100,000 fund).

The value for IHT410 is the total fund value across all segments, not the value per segment.

Some annuities are sold with a 'guaranteed period' (usually 5 or 10 years).

If the annuitant dies within the guaranteed period, the remaining guaranteed payments continue and are payable to the estate.

For example, a 10-year guaranteed annuity that has been paying for 3 years: 7 years of remaining payments must be valued and included on IHT410.

The value is the present value of the remaining guaranteed payments — the insurer will calculate this.

A joint-life annuity continues to pay to the surviving spouse or civil partner after the first death.

There is no IHT implication on the first death (the annuity simply continues paying to the survivor as part of their own income).

Nothing is reported on IHT410 for a joint-life annuity on the first death.

Some modern annuities have 'value protection' (the insurer pays a lump sum if the annuitant dies before receiving payments equal to the original purchase price).

This lump sum, if payable to the estate rather than to a trust or nominated beneficiary, must be included on IHT410.