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HMRC internal manual

Inheritance Tax Manual

Life Policies: annuities payable to deceased/transferor by insurance companies: annuities ceasing on the death

If the deceased had been entitled to a contractual annuity which ceased on their death no claim normally arises. As the annuitant is dead the annuity has no value as an item of free estate.

However, some insurance company annuity contracts contain provisions which give the annuitant the right to a lump sum if the annuity payments made to them during their lifetime do not total a specified amount, for example the purchase price of the annuity. These are often referred to as capital protected annuities.

  • If this right has been retained this lump sum forms part of the death estate. See IHTM20026 for procedural instructions.
  • If the right has been assigned or settled during the annuitant’s lifetime there will probably have been a transfer of value, and this should be shown on form IHT403. See IHTM20046 for procedural instructions.