Investment bonds which have multiple lives assured who are not owners of the bond or capital redemption bonds which have a term instead of lives assured can be modelled using the Do Not Payout option on the Insurance Payout dropdown.
Using this option stops the insurance payout occurring on death of the policy owner(s). The estate value of the bond will not include the insurance element (usually 101%) and death of the policy owner will not be treated as a chargeable event. The bond can be distributed to the beneficiaries intact.
How to model
Video:
How to model a Bond with multiple lives assured
Step by Step instructions:
In this example the bond is a jointly-owned offshore bond with their child as an additional life assured who is not a policy owner. The same principles apply to onshore and offshore bonds whether solely or jointly owned. Capital Redemption bonds can also be modelled in this way.
- Add a new Investment by clicking the + button in the bottom right corner of the Dashboard, then click Savings & Investment then Investment.
- Complete the Basics screen, selecting either Onshore Bond or Offshore Bond as appropriate.
- Ensure that you complete all the necessary fields which will vary depending on whether it is a new or existing bond. Don't forget to complete the Segments fields and the Remaining Principal/Cost Basis for existing bonds.
- In the Insurance Payout dropdown select Do Not Payout.
- In the Timing screen set the holding period for the Bond (this will usually be Start to Plan End).
- In the Beneficiaries Screen input the details of who the bond should pass to on the death of the policy owner(s). For jointly owned bonds, the bond will pass to the co-owner(s) first and the details in the Beneficiaries screen will be used on death of the last policy owner.
- Click Done.
View the Investment Bond in the Charts
In Let's See or Dashboard > Assets > Details you can view the value of the Bond in any year of the plan.
More detail can be seen in Year View > Investments.
View the Investment Bond in the Legacy screen
In Overview > Legacy the bond is transferred to the co-owner on first death. The first to die's share of the bond value is included in the estate value.
On second death, the full value of the Bond is included in the second to die's estate with no insurance uplift and no chargeable event. The bond is transferred to the beneficiary set in the Beneficiaries screen.