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If I snuff it, my wife gets death benefit from the pension scheme of 3x salary plus 1x annual salary from my employer..
Question is whether this benefit would be taxable, would Mrs S be hammered with a big bill for inheritance tax or something else. If so, could I set up a trust for this benefit to be paid into trust instead to avoid this?
Thanks
I don't believe so as most I've seen in the past rely on the Trustees 'agreeing' to it plus it's not actually a part of your estate but a payment directly to someone else (just triggered by your death).
Although it'd be handy in your case to be taxed, as it's the taxpayer that is (probably) paying it anyway 🙂
So if it is not part of the estate, does that mean it is not taxable?
Most likely tax free. Check your scheme documentation but it would be a very unusual scheme (in the UK at least) if it wasn't paid tax free
I guess it's like any insurance policy, the premium is taxed, but the payout isn't.
Well it's paid under discretionary trust hence it doesn't form part of the deceased's estate and can't have been assigned by the deceased. Usually the member will have been asked to complete an expression of wish form that the scheme trustees will take into consideration but it is the trustees decision who receives the payment and it may be split several ways. If franksinatra didn't nominate his wife but split it between his mistresses then his wife may get none of the lump sum. She is pretty much guaranteed any spouses pension...
Yep, it is entirely discretionary whether they pay out but I have filled in the paperwork to say it should go to her.
It is a standard LGPS pension, so I'm leaning towards thinking there is no need to set up a trust as she should get it tax free anyway?
...but I have filled in the paperwork to say it should go to her.
Your mistresses won't be pleased if they find out
yeah, no dessert when they find out.....then again by the time they find out you'll be a stiffy rather than having one
Looking at [url= https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/443242/5013_Taxation_of_lump_sum_death_benefits.pdf ]this[/url] on Gov website it actually seems that placing in trust could mean a higher rate of tax payable and therefore worse off.
Frank is confused.
Less talk of a mistress though, I find it hard enough maintaining just one relationship, my head hurts at the thought of two!
That proposal you linked to, I don't think that applies to death in service lump sums. A quick read suggests it is about pension funds that remain after a scheme member has died