Pension Legacy Preservation Trust

WSB

Apologies to those that may have seen a similar post recently.

Unfortunately on that occasion I believe I got my terminology wrong.
Hence trying again now. 

Should I setup a pension "Legacy Preservation Trust" aka spousal bypass trust ?

My understanding of the "Legacy Preservation Trust" is that on my death, the monies will get passed to my wife but not form part of her estate.
Hence, when she dies and the monies then get passed on to our children, it will not be subject to inheritance tax. 

Rather simply explained there but what are the pros and cons to setting up a pension  "Legacy Preservation Trust"? 

Thank you

NedS

I have no idea what a Legacy Preservation Trust is, but pensions do not form part of your estate anyway so are not liable to inheritance tax. If you leave your pension pot to your beneficiary, any monies they keep within the pension will then not form part of their estate and can be passed on indefinitely free from inheritance tax. If they take cash out of the pension, tax will become liable at the appropriate rates, including inheritance tax should they withdraw large amounts and not spend it before their death.

If you wish to create a perpetual benefit, each generation should only draw the income they need, when they need it.

Marcon

WSB said:

Apologies to those that may have seen a similar post recently.

Unfortunately on that occasion I believe I got my terminology wrong.
Hence trying again now. 

Should I setup a pension "Legacy Preservation Trust" aka spousal bypass trust ?

My understanding of the "Legacy Preservation Trust" is that on my death, the monies will get passed to my wife but not form part of her estate.
Hence, when she dies and the monies then get passed on to our children, it will not be subject to inheritance tax. 

Rather simply explained there but what are the pros and cons to setting up a pension  "Legacy Preservation Trust"? 

Thank you

You don't (usually) need a legacy preservation trust to achieve what you have outlined above - legislation already lets you do what you want to do without setting up a dinky little arrangement.

If you are concerned about possible future divorces within the family, or other events which might dilute your assets for future generations, then such trusts can be worth considering, but remember they come at a cost.

najan49

WSB said:

Should I setup a pension "Legacy Preservation Trust" aka spousal bypass trust ?

IMO it’s impossible to answer this question.

You need to state what you hope to achieve by using such an arrangement. Only then is it possible to say whether your suggested course of action is appropriate.

WSB

najan49 said:

WSB said:

Should I setup a pension "Legacy Preservation Trust" aka spousal bypass trust ?

IMO it’s impossible to answer this question.

You need to state what you hope to achieve by using such an arrangement. Only then is it possible to say whether your suggested course of action is appropriate.

What I was hoping to achieve was to ensure future generations (namely my kids, assuming I die first then my wife and the pension port gets passed in this order) are sheltered from inheritance tax.

If i can achieve this without setting up a legacy preservation trust then that's great.

I assume the only advantage of doing so would be to cover divorce scenarios to ensure bloodline inherits?

Marcon said that setting up a LPT would come at a cost.
Not sure what he was referring to here. 
My pension advisor said he would do that for free (yeah I know, his words but mine) presumably doing as part of my yearly advice costs.

Finally, assuming i don't go for the LPT, I believe I'm correct in that i need ro nominate my wife as the first beneficiary.
Can I also nominate my kids as nominated beneficiaries after that?
Or is that something she will need to set up upon my death. 

Unless that's where an LPT comes to play, in that I can nominate two levels of beneficiaries in advance? 
But then i guess, maybe that's not 100% secure as could be changed by my wife when the time comes? 

Thanks all

barnstar2077

WSB said:

najan49 said:

WSB said:

Should I setup a pension "Legacy Preservation Trust" aka spousal bypass trust ?

IMO it’s impossible to answer this question.

You need to state what you hope to achieve by using such an arrangement. Only then is it possible to say whether your suggested course of action is appropriate.

What I was hoping to achieve was to ensure future generations (namely my kids, assuming I die first then my wife and the pension port gets passed in this order) are sheltered from inheritance tax.

If i can achieve this without setting up a legacy preservation trust then that's great.

I assume the only advantage of doing so would be to cover divorce scenarios to ensure bloodline inherits?

Marcon said that setting up a LPT would come at a cost.
Not sure what he was referring to here. 
My pension advisor said he would do that for free (yeah I know, his words but mine) presumably doing as part of my yearly advice costs.

Finally, assuming i don't go for the LPT, I believe I'm correct in that i need ro nominate my wife as the first beneficiary.
Can I also nominate my kids as nominated beneficiaries after that?
Or is that something she will need to set up upon my death. 

Unless that's where an LPT comes to play, in that I can nominate two levels of beneficiaries in advance? 
But then i guess, maybe that's not 100% secure as could be changed by my wife when the time comes? 

Thanks all

You can just name your kids and wife as beneficiaries with your pension provider and they will inherit outside of your estate anyway, so it sounds like SJP trying to make it look like they are doing something, and hoping to tie you into them for even longer.  Pensioncraft on YouTube have a video about them explaining that not all of their fees are obvious and the performance of their own funds are sub par, regardless of what they have told you, I would check it out so you know what kind of company you are dealing with.

dunstonh

What I was hoping to achieve was to ensure future generations (namely my kids, assuming I die first then my wife and the pension port gets passed in this order) are sheltered from inheritance tax.

That is already achievable without the trust.   A normal expression of wish to your wife will suffice.  Then she updates the expression of wish to the children if you die first and so on.

I assume the only advantage of doing so would be to cover divorce scenarios to ensure bloodline inherits?

Expression of wishes can be updated and many providers allow you to write an explanation of wishes free text (i.e. where and why and what ifs)

Marcon said that setting up a LPT would come at a cost.
Not sure what he was referring to here. 
My pension advisor said he would do that for free (yeah I know, his words but mine) presumably doing as part of my yearly advice costs.

In my experience, I find the local SJP sales rep uses trusts for as much as he can.  It makes it harder for an IFA to unwind it and can tie you into the company due to the cost or inconvenience of getting out of it.

Finally, assuming i don't go for the LPT, I believe I'm correct in that i need ro nominate my wife as the first beneficiary.
Can I also nominate my kids as nominated beneficiaries after that?
Or is that something she will need to set up upon my death. 

You can nominate your wife and give your instructions in written form if she was to predecease you.

WSB

Am filling out the Expression Of Wish form, naming my wife to receive 100% and my two sons to receive 50% each if my wife predeceases me or we die at the same time.

However, for each beneficiary it requests whether proportion of benefits is a lump sum or income or both. 
Wasn't sure what to select here?

Also, if I die before my wife but after we're retired and we are using the drawdown method of getting funds out of the pension pot, will my wife be able to continue using this drawdown method after my death?

Thanks 

dunstonh

However, for each beneficiary it requests whether proportion of benefits is a lump sum or income or both. 
Wasn't sure what to select here?

It will be asking how much of the fund you want to pass to each beneficiary.  So, in your scenario you would have your spouse at 100%.

Many providers have a simple form but they will accept a written explanation of your wishes where the form doesn't match what you are after.

Also, if I die before my wife but after we're retired and we are using the drawdown method of getting funds out of the pension pot, will my wife be able to continue using this drawdown method after my death?

Your wife will be given the choice of taking it as a lump sum or having it transferred to her name to continue drawing against it as per her needs.   This is the reason why many of us are not seeing value in the trust based on what you have told us.

WSB

Thank you to all for your help. Have learned a lot.
Cheers!