Premium bonds question.

[csandsickofit]

Pondering last night. If I had premium bonds and died, DH could leave them in the draw for a year. Say he sorted all the will, probate etc and everything was sorted, IHT paid ( if relevant) then 11 months in my bond won £1million, what happens? Is it my DHs as he inherited it even though the bond is in my name? Does it have any tax implications even though it’s tax free?

If he inherits it, then surely it transfers to his name?

I would have thought that, once it's officially/legally his, then it's his bond with the same rules as if he bought it himself.

However, I do wonder what the IHT treatment would be if it won the £1M after you died but before probate was granted/IHT calculated? Would it be outside IHT because the bond was legally his from the time of your death? Or would it be taxable as cash because it was part of your estate?

@Bjorkdiditwouldn’t it be income for the estate? After I paid my IHT bill anything else that came in e.g. closing interest was treated as income for the estate. Premium bond wins are tax free so the estate wouldn’t owe any tax.

IHT, where applicable, would be paid on the value of the holding only.

Interest during private firms part of the estate. So would winnings on premium bonds.

premium bonds are a shitty investment though. Put it in an isa. Isas can be transferred between spouses on death (they still form part of the estate but you can keep the isa protection).

It was a hypothetical question, it was something I was pondering whilst unable to sleep!

if I had max holding, and so did he (I wish!) he wouldn’t be able to have £100k of premium bonds though would he? So they wouldn’t be in his name, technically. Which poses another question!

Premium bonds can't be transferred- if you inherit them they have to be sold and you get the money instead. So if you already have full holdings you'd just get £50k cash.

Unless I've misunderstood, it would be your estate that won if they remained as bonds for the 12 months after death. So presumably IHT would be paid on the sum and then the remainder distributed to beneficiaries?