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