Life Assurance and other insurance policies

Part 6 Life Assurance and other insurance policies

October 2012 

31.5.117 Introduction

This part should be read in conjunction with the Case Help Manual part Life Policies. Where appropriate links to relevant paragraphs of that Part have been inserted in the text below.

 

35.1.118 Life assurance policies – general

Life assurance policies come in a variety of forms for example, whole life or term policies (where the obligation on the insurer is to pay on death or on death within a specified time), endowment policies (where the obligation is to pay on a specified date or on death), or annuities and policies linked to investments in property. Any payments may be made to a named individual or individuals or be held in trust. Some life assurance policies are valuable items of property which may be used as security, sold or otherwise disposed of.

 

31.5.119 Protecting life assurance policies

The policy documents, in all cases should be recovered from the bankrupt, unless the policy is held as security by a secured creditor. The Preliminary Information Questionnaire (forms PIQB or PIQDP) instructs the bankrupt to send or deliver by hand all insurance policies to the official receiver. The importance of the policy document is explained in paragraph 5 of the Case Help Manual part, Life Policies. The official receiver on becoming aware of a life assurance policy should write, using the form NTASS, to the assurance company to inform them of the bankruptcy order and to ask them to note the official receiver’s interest, if any. The assurance company should be asked to confirm the type of policy and its surrender value, if any.  

 

31.5.120 Life assurance policies held in trust

The official receiver may come across life assurance policies where the payments are held in trust for the benefit of individuals other than the bankrupt. A trust may be created by the assurance company upon receiving a request and the completion of the trust documents. An existing assurance policy may have been converted into a trust either by way of a deed of assignment or by a declaration of trust. Where a trust has been created the individual whose life is insured cannot be a beneficiary. Reasons for a  policy being subject to a trust include controlling the destination of the funds paid out on the policy and ensuring the payment of the sum assured without the need to wait for probate or (in the absence of a will) letters of administration to be granted.

 

31.5.121 The creation of a trust with a new life assurance policy

The official receiver should be satisfied that the creation of a trust with a new life assurance policy was not an attempt by the bankrupt to put assets, for example the level of premiums paid, out of the reach of creditors (see paragraph 31.5.122). Once the official receiver is satisfied, regarding the existence of the trust, he/she will have no further interest in the assurance policy [Note 1]

 

31.5.122 Existing life assurance policy converted into a trust

Where the bankrupt transfers an existing life assurance policy into a trust the official receiver should check the deed of assignment or declaration of trust to ensure that the bankrupt has not attempted to put the life assurance policy out of the reach of his/her creditors. Part 3 of Chapter 31.4A provides further detailed guidance on transactions at an undervalue.

 

31.5.122a Third party payment of life assurance premiums

(inserted January 2013)

Where a third party has paid the life assurance premiums up to the date of the bankruptcy order a “resulting trust” is created. The contribution to the premiums entitles the third party to a proportionate share of the surrender value or any repayment made under the terms of the policy [Note 1a]. A “resulting trust” is not created were the third party intended the payments to be a gift or a loan (see paragraph 34.5.122b for further details). Where the premiums have been paid by a third party the official receiver should establish whether the payments were a gift or a loan before accepting any third party interest in the policy.

 

31.5.122b Third party payments – “presumption of advancement”

(inserted January 2013)

Legally third party payments by a husband or father are to be treated as gifts, unless otherwise stated, according to the presumption of advancement. The “presumption of advancement” originated in 19th century family relationships which now appear outdated. The presumption has been criticised by Lord Diplock in Pettitt v Pettitt [1970] AC 777 but the principle has not been changed. As a matter of Insolvency Service policy, where the third party making payments is either the  husband or  father of the bankrupt any payment will be treated as creating a “resulting trust” unless it can be shown that the monies were either a gift or a loan. In this way a husband, or father, will receive the same treatment as a wife, or mother.

 

31.5.123 Explaining what will happen to a bankrupt’s assurance policy

(amended January 2013)

The official receiver should explain to the bankrupt what will happen to his/her assurance policy or policies, see paragraphs 31.5.121, 31.5.122a, 31.5.122b, 31.5.125 and 31.5.127. The official receiver should inform the bankrupt of the consequences of continuing to pay premiums into a policy which continues to vest in the trustee. The bankrupt should be aware that if he/she dies, or the policy matures, the whole benefit will be claimed by the trustee.

 

31.5.124 Non-payment of premiums on an life assurance policy

A policy may lapse without a surrender value if the premiums are not paid. However, the assurance company may treat the policy as “paid up”. An assurance company will pay the surrender value on a “paid up” policy once the outstanding premiums have been paid. This often results in the monies paid to the beneficiary being reduced in order to pay the outstanding premiums.

 

31.5.125 Life assurance policies with a surrender value

(amended January 2013)

The official receiver as trustee should decide whether the policy will continue to vest (paragraph 31.5.126), whether to surrender the policy (see Case Help Manual Life Policies paragraph 10), whether there is any third party interest (paragraphs 31.5.122a and 31.5.122b) or whether to sell the policy (paragraph 31.5.129). In complicated cases the official receiver should seek the advice of Technical Section.

 

31.5.126 Life assurance policy continuing to vest in the trustee

The official receiver should not consider surrendering or selling a life assurance policy to the bankrupt or other third party where claim is likely to be made in the foreseeable future. In addition to paying out on death the assurance company may pay out on receiving notification of a terminal illness. Where a payment is made the monies should be paid directly to the official receiver as trustee. Where a claim is likely in the foreseeable future premiums may be paid by the bankruptcy estate. Before committing to pay the future premiums the official receiver should be satisfied that the potential benefit for creditors is greater than the likely cost of the premiums. In cases of doubt the official receiver may wish to seek the advice of Technical Section.

 

31.5.127 Selling a life assurance policy

Where the bankrupt has a life assurance policy with a surrender value the official receiver may consider selling the policy to a family member or third party, where for example the bankrupt may find it difficult to obtain another policy and would like the policy to continue to protect his/her family. The consent of the assurance company to assign the policy will need to be obtained by the purchaser before the sale can proceed. See Case Help Manual, Life Policies paragraphs 11 and 14 for further details including the policy’s sale price.  Where the official receiver is considering selling the assurance policy to a family member or third party form SOPOL should be sent to the bankrupt.

 

31.5.128 Life assurance policies with no surrender value

Some life assurance policies have no realisable value and cannot be surrendered such as term life policies. If the premiums are not paid the policy will lapse (see paragraph 31.5.124). A life assurance policy without a surrender value vests in the official receiver as trustee. The official receiver should decide whether the policy continues to vest or whether to sell his/her interest in the policy to the bankrupt (see paragraph 31.5.129). Where the official receiver decides that the policy should continue to vest he/she should follow the advice in paragraphs 31.5.126 and 31.5.131.

 

31.5.129 Selling a life assurance policy to the bankrupt

Where the official receiver is satisfied that there is no foreseeable prospect of making a claim under the policy he/she should offer to sell his/her interest to the bankrupt. The Insolvency Service has adopted a standard fee of £50 to cover the administrative costs of any assignment. The official receiver should send form LTBPOL to the bankrupt which explains the position. The letter informs the bankrupt that if he/she does not purchase the trustee’s interest and continues to pay the premiums then any payment due from the life assurance policy will be an asset in the bankruptcy proceedings. Where the official receiver, as trustee, decides to sell his/her interest in a life assurance policy to the bankrupt any future premium payments should be allowed in his/her calculation for an income payment agreement or order. As a result the amount of these should be considered at the time the decision is made.

 

31.5.130 Disposing of the trustee’s interest in a life assurance policy

Where the official receiver as trustee sells his/her interest in the life assurance policy to the bankrupt he/she should write to the assurance company saying he/she no longer has an interest in the policy and any future monies due under the terms of the policy should be paid to the beneficiary or beneficiaries. The official receiver should consider sending a copy of the letter to the bankrupt. Further information is contained in Case Help Manual Life Policies paragraphs 9 and 15.

 

31.5.131 Life assurance policies that remain vested in the trustee

Where the official receiver has been unable to surrender or otherwise dispose of a policy the trustee will be able to receive any payments due under the policy. This may include monies paid on death, on disability, etc. The trustee would be entitled to receive these monies even if they are paid after the bankrupt’s discharge [Note 2]. The official receiver should make the bankrupt aware of the consequences of continuing to pay premiums into a policy which vests in the trustee.

 

31.5.132 Joint life assurance policies – initial action 

The bankrupt may have a life assurance policy in joint names with his/her spouse, business partner(s) or civil partner. Usually a joint life assurance policy is held on a joint tenancy. The making of the bankruptcy severs the joint tenancy and the bankrupt’s beneficial interest, usually 50%, vests in the trustee in bankruptcy [Note 3]. To determine the extent of the trustee’s interest the official receiver should obtain details of the beneficial owners together the surrender value, if any from the assurance company.

 

31.5.133 Dealing with a joint life assurance policy

(amended January 2013)

Once the official receiver has established that the bankrupt’s interest in the life assurance policy forms part of the bankrupt’s estate he/she should wait until appointed trustee before dealing with it. The official receiver as trustee should decide whether the policy will continue to vest (paragraph 31.5.126), whether the policy will be surrendered (paragraph 31.5.127), whether there is any third party interest (paragraphs 31.5.122a and 31.5.122b) or whether to sell the policy (paragraph 31.5.124 or 31.5.128). In complex cases the official receiver should seek the advice of Technical Section.

 

31.5.134 Joint life assurance policy continuing to vest in the trustee

The official receiver should not consider surrendering or selling an interest in a life assurance policy to the bankrupt where there is a prospect of a claim being made in the foreseeable future. In addition to paying out on death the assurance company may pay out on receiving notification of a terminal illness. Any payments in respect of the bankrupt’s interest should to be paid directly to the trustee. In all other instances the bankrupt and joint policy holder should be informed that the bankrupt’s interest will continue to vest in the trustee. The official receiver may come to an agreement with the joint policy holder whereby the bankrupt’s share of future premiums are paid by the bankruptcy estate. Before committing to this the official receiver should be satisfied the potential benefit for creditors is greater than the likely cost of the premiums.

 

31.5.135 Joint life assurance policy – the official receiver's interest on the death of the bankrupt and/or joint policy holder

Where the bankrupt’s interest in a joint life assurance policy vests in the trustee he/she will have an interest  in the policy proceeds should a claim be made under the policy. The joint policy holder may be able to claim more than half the policy proceeds if he/she has made the premium payments. On confirmation that the life assurance policy provides for the proceeds to be paid directly to the bankrupt on the death of the joint policy holder any payment will vest in the trustee.

 

31.5.136 Joint life assurance policy with a surrender value

Where a bankrupt has an interest in a joint life assurance policy with a surrender value the official receiver would need the consent of the non-bankrupt joint policy holder in order to sell or surrender the policy. The surrender or sale documents require the signature of both the official receiver as trustee and the joint policy holder.

 

31.5.137 Joint life assurance policy with a surrender value – all policy holders bankrupt

If both of the joint policy holders are bankrupt the documents should be signed by the official receiver as trustee of the bankrupts’ estates Where the official receiver is surrendering the policies he/she should confirm that bankruptcy orders have been made against all both of the joint policy holders.

 

31.5.138 Surrendering a joint life assurance policy

Once the official receiver has established that a joint life assurance policy has a surrender value he/she should confirm that the bankrupt’s interest forms part of his/her estate (see paragraph 31.5.120 and 31.5.132). The official receiver should consider the matters in paragraph 31.5.133 before deciding to surrender the policy. On deciding to surrender the policy the official receiver should wait until appointed trustee before doing so. Where the official receiver is trustee a letter should be sent, if not already done (see paragraph 31.5.119), to the assurance company asking for the surrender documents. The official receiver as trustee will need to complete the surrender documents, obtain the joint policy holder’s signature and send the documents to the assurance company. The letter should request the bankrupt’s interest in the policy be remitted to the official receiver as trustee and the balance paid to the joint policy holder.

 

31.5.139 Selling the bankrupt’s interest in a joint life assurance policy

The official receiver’s interest in a joint life assurance policy with a surrender value may be sold to either the bankrupt or the joint policy holder. The official receiver should consider the matters in paragraph 31.5.133 before deciding to sell the policy. On deciding to sell the policy the official receiver should  send the form JTPOL to the bankrupt and joint policy holder(s). The letter asks whether the bankrupt or the joint policy holder(s) are prepared to make an offer, based on the current surrender value, to buy the official receiver’s interest. Where the official receiver, as trustee, decides to sell his/her interest in a life assurance policy any future premium payments should be allowed in his/her calculation for an income payments agreement or order.

 

31.5.140 Dealing with an offer to purchase an interest in a joint life assurance policy

Where an offer to purchase the official receiver’s interest in a joint life assurance policy is made by the bankrupt it is important to consider the proposed source of funds. Funds should not be used that would otherwise be available to the estate. Further information is contained in the Case Help Manual Life Policies paragraphs 12 and 16. 

 

31.5.141 Failure to sell the official receiver’s interest in a joint life assurance policy

Where the official receiver is unable to sell or surrender his interest in a joint life insurance policy he/she should ask the assurance company to continue to note his/her interest in the policy. The policy should then be treated as a long term asset.

 

31.5.142 Joint life assurance policy with no surrender value 

Where a joint life assurance policy does not have a surrender value the official receiver, after considering the matters mentioned in paragraph 31.5.133 may consider selling the trustee’s interest in the policy to the bankrupt or joint policy holder. The Insolvency Service has adopted a standard fee of £50 to cover the administrative costs of any assignment. The official receiver should send form LTBPOL to the bankrupt which explains the position. The letter clearly states that if the bankrupt does not purchase the trustee’s interest and continues to pay the premiums then any payment due from the life assurance policy will be an asset in the bankruptcy proceedings.

 

31.5.143 The sale of the bankrupt’s interest in a joint life assurance policy with no surrender value 

Once the joint holder has purchased the trustee’s interest in the policy the official receiver should write to the life assurance company confirming that he/she no longer has any interest in the policy. The letter should confirm that any monies payable under the terms of the policy should be paid to the beneficiary or beneficiaries. Where the official receiver considers it appropriate he/she may send a copy of the letter to the bankrupt.

 

31.5.144 Joint life assurance policy - both policy holders bankrupt

Where both policyholders are bankrupt and the policy does not have a surrender value the official receiver, (after considering the matters mentioned in paragraph 31.5.133) may consider selling the trustee’s interest in the policy to the bankrupts. Where the official receiver, as trustee, decides to sell his/her interest in a life assurance policy to the bankrupts any future premium payments should be allowed for in any calculation for an income payment agreement or order. The Insolvency Service has adopted a standard fee of £50 to cover the administrative costs of any assignment. Where both bankrupt's purchase their own or the joint policy holder's interest they should be charged £50 for each interest. The official receiver should send form LTBPOL to the bankrupt which explains the position. The letter informs the bankrupt that if he/she does not purchase the trustee’s interest and continues to pay the premiums than any payment due from the life assurance policy will be an asset in the bankruptcy proceedings.

 

31.5.145 Joint life assurance policy – no sale of the bankrupt's interest

Where the joint policy holder is unwilling to surrender or sell the policy or no willing purchaser comes forward, the trustee's interest in it remains. The official receiver should write to the assurance company asking them to continue to note his/her interest in the policy. The policy should then be treated as a long term asset.

 

31.5.146 Endowment policies

An endowment policy is a policy into which a premium is paid each month for a set period, for example, 10, 15 or 25 years. The premiums are usually invested by a fund manager in other investments. The most common type of endowment policy is called a “with profits” policy. The “unit linked” policy is another common type of endowment policy. Further information can be found in the Case Help Manual part, Life Policies.

 

31.5.147 “With profits” endowment policy

A “with profits” policy includes the right to receive a share of any extra profit made by the company over and above the basic sum assured. During the term of the policy any profits made by the fund manager are accrued to the policy, usually on an annual basis. At the end of the policy a payment is made to the policy holder(s) consisting of the basic sum assured, any profits accrued and, sometimes, a terminal bonus. The total payment reflects the success of the investment and may be less than the basic sum assured.

 

31.5.148 “Unit linked” endowment policy

A “unit linked” endowment policy usually consists of a formal savings policy with attached life assurance. The policy holder(s) buy into funds which are usually managed by the assurance company. The funds are linked to the stock market and increase or decrease with movements in the market. Each fund is divided into units which have a price and the policy holder(s) will buy a number of units based on the amount invested. The value of the units purchased depend on the performance of the fund in the market. The policy holder(s) can sell the units at any time, usually less a 5% charge. Whilst large profits may be made when the markets are doing well the value of the fund, and as a result the units, could become worthless if the market crashes.

 

31.5.149 Initial stages when dealing with an endowment policy

Where the bankrupt is the policy holder or joint policy holder of an endowment policy the official receiver should send notice, NTASS to the company. The assurance company will be asked to provide information and to note the official receiver’s interest. The official receiver should establish what type of endowment policy is held by the bankrupt, the surrender value of the policy and whether a third party has a charge on the policy.

 

31.5.150 Endowment policies and house purchases

Towards the end of the last century it was common for houses to be bought with an interest only mortgage together with an endowment policy for the same period. When the endowment policy matured the proceeds would be used to pay off the balance outstanding on the mortgage. It was anticipated that the policy would also provide a surplus to the policy holders after the mortgage had been repaid. This method of  buying a house has become less popular as with less favorable market conditions in more recent times the proceeds from maturing policies have not been sufficient to cover outstanding mortgages. Although mortgages with endowment policies have fallen in popularity the official receiver is likely to encounter them for the foreseeable future as they were often for a 25 year term.

 

31.5.151 Checking whether the endowment policy is subject to a charge

The official receiver should check whether the endowment policy has been formally charged to determine whether it is a free asset for the benefit of the estate. A formal deed of assignment should be drawn up by the loanee and/or mortgagee who will also hold the original policy document for safekeeping. Where the loanee or mortgagee does not have a formal assignment of the endowment policy they may still have an equitable charge on the policy.

 

31.5.152 Is there an equitable charge on the endowment policy?

The major lenders, in some instances, have not assigned the policy or registered a formal charge over it. Whilst it would appear that the policy is an unsecured asset a court may find that an equitable charge over the policy has been created in favour of the loanee or mortgagee. The official receiver should check the mortgage or loan agreement to see if the endowment policy was a requirement of the contract in support of the loan. Further evidence of an equitable charge would be the bankrupt depositing the policy with the loanee or mortgagee and/or notifying the assurance company. Where the official receiver believes the loanee or mortgagee may have an equitable charge he/she should ask the assurance company whether they have a claim on the policy and to provide supporting evidence. The official receiver should take into account all the relevant information in each individual case before deciding whether an equitable charge exists over the policy.

 

31.5.153 Dealing with a secured endowment policy which matures

When a secured endowment policy matures the proceeds are paid to the loanee or mortgagee. Where the proceeds are insufficient to meet the outstanding loan or mortgage the balance should be treated as a debt in the bankruptcy. Where the proceeds are more than sufficient to meet the outstanding loan or mortgage the surplus will usually be paid to the policy holder(s). The official receiver should have already given notice to the assurance company of his interest in the policy and would expect to receive notice of any surplus. The official receiver, as trustee, should then claim the bankrupt’s interest in the surplus for the benefit of the creditors. 

 

31.5.154 Dealing with an secured endowment policy once the loan has been repaid

An endowment policy may be assigned or held on an equitable charge by a loanee or mortgagee. The loan or mortgage may be repaid without the endowment policy maturing, either by monthly repayments or, in the case of a mortgage, by the sale of the property. In this instance the bankrupt’s interest in the endowment policy would become an unsecured asset which could be realised for the benefit of the estate (see paragraphs 31.5.156 and 31.5.157).

 

31.5.155 Unsecured endowment policy

The bankrupt may be holding the endowment policy document in his/her possession. If any loan or mortgage company is unaware of its existence it is unlikely that either could claim an equitable charge over the policy (see paragraph 31.5.152). The official receiver may treat such a policy as an unsecured asset which can be realised by the official receiver as trustee. 

 

31.5.156 Surrendering an unsecured endowment policy

Where the endowment policy has not been assigned, or is subject to an equitable charge, the official receiver as trustee may write to the company asking them to surrender the policy and to forward the proceeds to him/her. This applies for “with profits” and “unit linked” endowment policies. Where the endowment policy is in joint names the written agreement of the other beneficiary is required before the policy can be surrendered.

 

31.5.157 Selling an unsecured endowment policy

Where a “with profits” endowment policy has a surrender value of £1,500 or more the official receiver, as trustee, should consider selling it rather than surrendering it. The official receiver may sell a “with profits” endowment by auction or to “market makers”. A market maker is a company, a firm , or individual which buys endowment policies and sells them to other investors. More information on the sale of policies can be found on the Association of Policy Market Makers website here. Where the endowment policy is in joint names the written agreement of the other beneficiary should be obtained before the policy is offered for sale.

 

31.5.158 Unsecured joint endowment policy – no surrender or sale of the bankrupt's interest

Where the joint policy holder is unwilling to surrender or sell the policy or no willing purchaser comes forward the trustee's interest in it remains. The official receiver should write to the assurance company asking them to continue to note his/her interest in the policy. The policy should then be treated as a long term asset. An endowment policy should not be transferred to a Regional Trustee and Liquidator Unit unless it is jointly owned and the joint holder has not agreed to its surrender or sale.

 

31.5.159 Death of a bankrupt with an endowment policy

Where a bankrupt holds an endowment policy and dies whilst the official receiver is trustee the advice given in paragraph 31.5.132 and paragraph 31.5.145 should be followed.

 

31.5.160 Dormant or lapsed policies

If a bankrupt does not pay the policy premiums a policy may lapse or become dormant. In some instances a policy will lapse without value. However an assurance company may treat the policy as being “paid up” with a lower payment made, for example, on the death of the bankrupt. A number of assurance companies allow a policyholder to reinstate a dormant or lapsed policy on the payment of the outstanding premiums. Where a bankrupt reinstates a lapsed or dormant policy, even where the payments are made post-discharge, the whole benefit can be claimed by the trustee when it is paid out as the policy vests in the trustee. The official receiver should inform the bankrupt of the consequences of reinstating and continuing to pay the premiums of a lapsed policy which vests in the trustee. For further information on this see paragraphs 31.5.134, 31.5.145 and 31.5.158. If the bankrupt seeks advice on life assurance in general he/she should be informed to contact an independent financial advisor.

 

31.5.161 Lost policy document

In some circumstances the bankrupt will be unable to produce the original policy document. The official receiver should still be able to surrender the policy however the procedure to do so with each assurance company may differ. Usually the assurance company will issue the official receiver with a “lost policy declaration form”. The form should be signed by the official receiver as trustee. The official receiver is usually asked to confirm that he/she has no knowledge of the policy’s whereabouts and if it comes into his/her possession it will be forwarded to the assurance company. If the policy is in joint names the joint policy holder will be required to sign the form. The form should be sent to the joint policy holder for signature before the official receiver signs it.

 

31.5.162 Lost policy document – indemnity insurance

The assurance company may ask the official receiver to take out indemnity insurance when asked to surrender a policy where the policy document has been lost. If the official receiver receives such a request he/she should follow the advice given in paragraph 49.24. Where the surrender value is substantial the official receiver should consider obtaining separate indemnity insurance. If the official receiver is uncertain that indemnity assurance is appropriate he/she should contact Technical Section.

 

31.5.163 Windfall payments arising from assurance policies

In the past assurance companies have merged with other financial institutions. Some assurance companies have demutualised and subsequently floated their shares on the stock exchange. In such cases financial incentives such as shares and/or cash bonuses have been offered to existing account or policy holders.

 

31.5.164 Claiming windfall payments from assurance companies

Where the official receiver is trustee he/she should claim any windfall payment arising from a merger or flotation on the stock exchange as property arising out of or incidental to property, in this instance being the policy [Note 4]. The official receiver as trustee should write to the assurance company asking for any windfall monies to be paid directly to him/her. In the past some assurance companies have refused to pay the bonus payment to the official receiver on the grounds that the trustee does not become a member of the company when the policy vests.

 

31.5.165 Dealing with windfall payments paid to an undischarged bankrupt

Where the assurance company refuses to accept the trustee as a member they may pay any windfall monies directly to the bankrupt. If the payment is made before the bankrupt is discharged the official receiver should claim the monies as an after-acquired asset (see part 2 of Chapter 31.8 for further information) [Note 5].

 

31.5.166 Dealing with windfall payments to a discharged bankrupt

The bankrupt may be entitled to receive a windfall payment after obtaining his/her discharge from bankruptcy. In this instance the official receiver as trustee should explain to the bankrupt that the windfall monies is property which arises out of or incidental to the policy and accordingly vests in the trustee [Note 6].  The bankrupt should be asked to sign a letter authorising the assurance company to pay the monies to the official receiver as trustee. If the discharged bankrupt refuses to sign the letter the official receiver may consider making an application for a court order instructing him/her to pay the monies to the official receiver [Note 7].

 

31.5.167 Windfall payments and joint policies

Where a joint policy is held the bonus payment is usually made to the first named policy holder. The official receiver should agree to an equal division of the bonus with the other policy holder if the bankrupt is the first named. If the other policy holder is the first named on the policy the official receiver should ask for an equal division of the bonus. If the other policy holder does not agree to an equal division of the monies the official receiver may consider making an application for a private examination and seeking an order instructing him/her to pay the monies to the trustee [Note 8]. 

 

31.5.168 Other insurance policies

A bankrupt may have other types of insurance, for example income protection, payment protection and ill health insurance. Where the policy is in the name of the bankrupt it is a vesting asset and comprises part of the bankrupt’s estate. The official receiver should write to the insurance company asking for his/her interest to be noted. If the bankrupt’s circumstances change and  the insurance policy pays out then the funds can be claimed by the trustee for the benefit of the estate, even where the payments are monthly. The bankrupt should be made aware that if policy pays out, the benefit will be claimed by the trustee. Where the policy has no surrender value and the insurance company would allow the official receiver’s interest to be reassigned to the bankrupt or third party such as, a family member, he/she may consider selling it for the standard £50 fee. Where the bankrupt would like to purchase the trustee’s interest and the official receiver has received confirmation that his/her interest may be re-assigned he/she should follow the advice provided in paragraphs 31.5.127 and 31.5.129 for the procedure to be followed when transferring the policy.

 

[Back to Part 5 – Post office accounts, cheques in hand and other investments] [On to Part 7   Employee share schemes]