Life insurance for married couple to mitigate IHT

planforfuture

Hi all, thanks for the reply.
Yes the estate is estimated near the 1.5m mark where the home is about 2/3 of it. The rests are GIA shares and ISA. SIPPS were not included here as they are exempted from IHT. My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months ... Hence i was exploring the life insurance option.

dunstonh

My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months

The SIPP is not affected by IHT or payment of it. Typically released within 1-2 weeks at the faster end or 3-4 weeks at the slower if there is an expression of wish.  Without an expression of wish, you could be looking up to a year.

planforfuture

Wow that's good news indeed. Thanks for the info.

If the beneficiary takes out the 25% tax free lumpsum of the inherited SIPP,  am I right that he does not need to pay tax for that?

dunstonh

If the beneficiary takes out the 25% tax free lumpsum of the inherited SIPP,  am I right that he does not need to pay tax for that?

There is no 25% TFC on a beneficiary pension.   

Marcon

planforfuture said:

Wow that's good news indeed. Thanks for the info.

If the beneficiary takes out the 25% tax free lumpsum of the inherited SIPP,  am I right that he does not need to pay tax for that?

If the SIPP owner is under the age of 75 when they die, the person(s) inheriting the SIPP, whatever their age (there's no minimum) doesn't pay tax on anything they withdraw.

If the SIPP owner is over 75 when they die, the beneficiaries pay income tax at their (own) marginal rate when they withdraw funds - there is no tax free element.

poseidon1

planforfuture said:

Hi all, thanks for the reply.
Yes the estate is estimated near the 1.5m mark where the home is about 2/3 of it. The rests are GIA shares and ISA. SIPPS were not included here as they are exempted from IHT. My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months ... Hence i was exploring the life insurance option.

Final point at £1.5 million net estate ( excluding sipps), your estate is not too far off the £2 million threshold at which  the residential nil rate band begins to erode, which currently facilitates your total joint nil rate bands of £1 million at the moment.

For an estate valued at £ 2.35 million the RNRB is completely lost, leaving your estate with just £650k joint NRB to shelter your estate.

So need to consider the following in your future planning;

* Liklihood of your non sipp assets growing considerably in excess of £2 million in the years to come ( house price inflation/ GIA & ISA appreciation).
* Liklihood that you both survive beyond age 75, thereby preventing tax free access to your sipp funds on behalf of your daughter, which could otherwise assist in paying IHT

With these factors in mind, we do circle back to your original query with regard to the benefit of life assurance ( in trust) to provide funds to pay IHT and/or look at liquidating some or all your GIA and explore a lump sum investment bond in an IHT mitigation trust structure.

With the budget on the immediate horizon, we will see to what extent matters discussed in these posts maybe affected going forward.

daveshep26

poseidon1 said:

planforfuture said:

Hi all, thanks for the reply.
Yes the estate is estimated near the 1.5m mark where the home is about 2/3 of it. The rests are GIA shares and ISA. SIPPS were not included here as they are exempted from IHT. My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months ... Hence i was exploring the life insurance option.

Final point at £1.5 million net estate ( excluding sipps), your estate is not too far off the £2 million threshold at which  the residential nil rate band begins to erode, which currently facilitates your total joint nil rate bands of £1 million at the moment.

For an estate valued at £ 2.35 million the RNRB is completely lost, leaving your estate with just £650k joint NRB to shelter your estate.

So need to consider the following in your future planning;

* Liklihood of your non sipp assets growing considerably in excess of £2 million in the years to come ( house price inflation/ GIA & ISA appreciation).
* Liklihood that you both survive beyond age 75, thereby preventing tax free access to your sipp funds on behalf of your daughter, which could otherwise assist in paying IHT

With these factors in mind, we do circle back to your original query with regard to the benefit of life assurance ( in trust) to provide funds to pay IHT and/or look at liquidating some or all your GIA and explore a lump sum investment bond in an IHT mitigation trust structure.

With the budget on the immediate horizon, we will see to what extent matters discussed in these posts maybe affected going forward.

Good guidance, although the taper is £1 for every £2 in excess of 2 million- (not straight -£1 for £) ;- hence £2.7mn estate is when you lose all of 2* RNRB. ( see RNRB TAPER - https://www.gov.uk/government/publications/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021 )

planforfuture

Yes thanks poseidon1 for the valuable information. 

poseidon1

daveshep26 said:

poseidon1 said:

planforfuture said:

Hi all, thanks for the reply.
Yes the estate is estimated near the 1.5m mark where the home is about 2/3 of it. The rests are GIA shares and ISA. SIPPS were not included here as they are exempted from IHT. My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months ... Hence i was exploring the life insurance option.

Final point at £1.5 million net estate ( excluding sipps), your estate is not too far off the £2 million threshold at which  the residential nil rate band begins to erode, which currently facilitates your total joint nil rate bands of £1 million at the moment.

For an estate valued at £ 2.35 million the RNRB is completely lost, leaving your estate with just £650k joint NRB to shelter your estate.

So need to consider the following in your future planning;

* Liklihood of your non sipp assets growing considerably in excess of £2 million in the years to come ( house price inflation/ GIA & ISA appreciation).
* Liklihood that you both survive beyond age 75, thereby preventing tax free access to your sipp funds on behalf of your daughter, which could otherwise assist in paying IHT

With these factors in mind, we do circle back to your original query with regard to the benefit of life assurance ( in trust) to provide funds to pay IHT and/or look at liquidating some or all your GIA and explore a lump sum investment bond in an IHT mitigation trust structure.

With the budget on the immediate horizon, we will see to what extent matters discussed in these posts maybe affected going forward.

Good guidance, although the taper is £1 for every £2 in excess of 2 million- (not straight -£1 for £) ;- hence £2.7mn estate is when you lose all of 2* RNRB. ( see RNRB TAPER - https://www.gov.uk/government/publications/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021 )

Appreciate the correction to the complete loss of the RNRB. Gives the OP a little more leeway before that relief is entirely lost.

artyboy

daveshep26 said:

poseidon1 said:

planforfuture said:

Hi all, thanks for the reply.
Yes the estate is estimated near the 1.5m mark where the home is about 2/3 of it. The rests are GIA shares and ISA. SIPPS were not included here as they are exempted from IHT. My understanding is that even SIPPS are IHT exempted but they won't be released until the required IHT is paid up within 6 months ... Hence i was exploring the life insurance option.

Final point at £1.5 million net estate ( excluding sipps), your estate is not too far off the £2 million threshold at which  the residential nil rate band begins to erode, which currently facilitates your total joint nil rate bands of £1 million at the moment.

For an estate valued at £ 2.35 million the RNRB is completely lost, leaving your estate with just £650k joint NRB to shelter your estate.

So need to consider the following in your future planning;

* Liklihood of your non sipp assets growing considerably in excess of £2 million in the years to come ( house price inflation/ GIA & ISA appreciation).
* Liklihood that you both survive beyond age 75, thereby preventing tax free access to your sipp funds on behalf of your daughter, which could otherwise assist in paying IHT

With these factors in mind, we do circle back to your original query with regard to the benefit of life assurance ( in trust) to provide funds to pay IHT and/or look at liquidating some or all your GIA and explore a lump sum investment bond in an IHT mitigation trust structure.

With the budget on the immediate horizon, we will see to what extent matters discussed in these posts maybe affected going forward.

Good guidance, although the taper is £1 for every £2 in excess of 2 million- (not straight -£1 for £) ;- hence £2.7mn estate is when you lose all of 2* RNRB. ( see RNRB TAPER - https://www.gov.uk/government/publications/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021/inheritance-tax-nil-rate-band-and-residence-nil-rate-band-thresholds-from-6-april-2021 )

Well that could then be a double whammy for people with large DC pension pots, if they get brought into scope for IHT in future... 

First world problems and all, but best guess for Mrs Arty and I is our estate on death (with the right planning) would be under £2m. Add DC pension residue (again with some planning assumptions) and we'd be well over the taper limit.

🎻