Using an annuity to reduce IHT ?

Ciprico

Googling indicates it can, the capital used to buy the annuity is considered spent so is no longer subject to iht.

So far so good.

But when you die, the annuity stops, or passes to spouse which is iht exempt anyway.....

So where's the annuity/IHT benefit...?

Somebody

Something on the lines of buying a joint whole of life assurance policy with the annuity income, and writing it into trust? 

Marcon

Have a look at https://rtsfinancialplanning.co.uk/shielding-your-pension-from-inheritance-tax/

dunstonh

Ciprico said:

Googling indicates it can, the capital used to buy the annuity is considered spent so is no longer subject to iht.

So far so good.

But when you die, the annuity stops, or passes to spouse which is iht exempt anyway.....

So where's the annuity/IHT benefit...?

You are assuming the beneficiary is the spouse.   It doesn't have to be.

Ciprico

Dunstonh,

Can it be as simple as that ? ie just nominate ones children as beneficiaries of the end of term annuity  payment and avoid iht.

The link on the other post above involves life insurance and trusts so looks a lot more expensive and complicated.....

(I have gifted money to my adult kids and that didn't work out too well)

Albermarle

Ciprico said:

Dunstonh,

Can it be as simple as that ? ie just nominate ones children as beneficiaries of the end of term annuity  payment and avoid iht.

The link on the other post above involves life insurance and trusts so looks a lot more expensive and complicated.....

(I have gifted money to my adult kids and that didn't work out too well)

From your earlier post, it seems you are talking about a Lifetime Annuity.
In this case there is no 'end of term annuity payment'
Depending on the annuity terms, there may be a provision for your Spouse to continue to receive monthly payments ( typically 50% of yours) but when they die that is the end of the annuity. So no IHT liability for your spouses estate as there is no money from the annuity.

That would be the 'normal' scenario. However @dunstonh has indicated that rather than your spouse getting a reduced pension, you could nominate one of your offspring. I was not aware of that but I wonder if wires have got crossed somewhere about the type of annuity we are talking about ?

Bostonerimus1

Albermarle said:

Ciprico said:

Dunstonh,

Can it be as simple as that ? ie just nominate ones children as beneficiaries of the end of term annuity  payment and avoid iht.

The link on the other post above involves life insurance and trusts so looks a lot more expensive and complicated.....

(I have gifted money to my adult kids and that didn't work out too well)

From your earlier post, it seems you are talking about a Lifetime Annuity.
In this case there is no 'end of term annuity payment'
Depending on the annuity terms, there may be a provision for your Spouse to continue to receive monthly payments ( typically 50% of yours) but when they die that is the end of the annuity. So no IHT liability for your spouses estate as there is no money from the annuity.

That would be the 'normal' scenario. However @dunstonh has indicated that rather than your spouse getting a reduced pension, you could nominate one of your offspring. I was not aware of that but I wonder if wires have got crossed somewhere about the type of annuity we are talking about ?

If you nominate your children as beneficiaries for your lifetime income annuity I imagine the payout rate of the annuity would be far less than the nominal rate for say 65 year old spouses. If there's a lump sum payment to children at death that probably would be subject to IHT unless the life insurance/trust wrapper tactic is used.