Tuesday, 3 December 2013

Spousal By-Pass Trust

For many of us our property will be the largest asset that we will be able to leave for the next generation and with prices once more rising, the probability will be that the majority of our Nil Rate Band (the amount free from Inheritance tax that can be passed on) will be used up by the value of one’s home.

The thought therefore of un-necessarily adding to a future tax bill for our children with hard earned pension savings may come as a shock. This is precisely what could happen when pension benefits are paid to a surviving spouse upon death before drawing a pension. Careful planning can reduce or even remove future tax burdens. By creating a bypass trust and registering it with the pension provider the fund is ring-fenced from future potential inheritance tax (IHT) liabilities.

Upon death the pension amount is paid by the pension provider not to a surviving spouse, but into a Trust. It is important to note that the Spouse can still access the funds through loans or income, however the capital amount never ‘enters’ the estate. Upon second death (the point that IHT is calculated) the monies pass freely onto the named beneficiaries.  

With the removal of the need to secure a pension with your benefits, and individuals working on beyond normal retirement ages, a relatively small and inexpensive amount of planning now can assist with future financial planning.

begin_of_the_skype_highlightingend_of_the_skype_highlightingTo discuss this and how Ward Williams Financial Services could help you, please call (01932) 830664 to organise a no obligation, initial meeting.