Bequeathing SIPP

margaretclare

I have a SIPP which is in drawdown. Nothing marvellous, just a few K invested, but I like it.

Now, I've assigned it on my death to a granddaughter. But, reading replies in other threads here, I've realised that, as she's not a dependant of mine (although she's frequently on the ear'ole for "help") she'd have to pay 55% tax on it.

Is it, therefore, better to assign it to my DH (legally wed), assuming he survives me?

xylophone

http://www.hl.co.uk/pensions/income-drawdown/what-happens-when-i-die

kidmugsy

margaretclare wrote: »

Is it, therefore, better to assign it to my DH (legally wed), assuming he survives me?

Yes. And if he finds the income from it surplus to his needs he can give it away free from inheritance tax.

atush

To the clueless GD lol.

Yes, a dependent (even a child much less a GD) must not be an adult who is not truly dependent on you. Only a spouse or true dependent can inherit (as pension not LS) the fund once it is in DD. Even thy must pay the 55% tax if taken as a LS.

margaretclare

Thank you to all for the useful info. I shall take appropriate action forthwith.

I suppose I had the idea, originally, of providing a pension for GD and that, if left alone for 20+ years, it would grow. 55% tax is the killer, though.

jamesd

You could leave it to the spouse for it to be paid into a pension pot in their name. You can provide for the GD with a life assurance policy on yourself with her as beneficiary, which would be paid outside your estate.

You could also arrange a discretionary trust if you don't trust her to spend wisely. A letter of wishes to the trustees of this discretionary trust could express your non-binding preferences. This is too expensive when only a few thousand Pounds is involved. It's more applicable if your estate will be of much more significant value after paying off any remaining debts.

It appears that the GD is not a minor so I don't think you could use a bare trust for this (just an account in her name operated by someone else as trustee).

mania112

Would a spousal bypass trust work in this situation?

grey_gym_sock

to keep it simple, if you have other assets which you could leave to GD instead, then they would at most be subject to IHT at 40% - and that only if you exceed the IHT allowance, from which everything left to your husband is exempt.

margaretclare

Thanks to all. I've just changed the assignment to my husband. He thinks it's all 'complicated', I don't think so, but at least it's all sorted now. I am nowhere near the IHT allowance!