Pension Beneficiaries - IHT Changes

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82129749#Comment_82129749

If the husband dies after 75 and the wife draws taxable income from the SIPP won't she have to pay IT on that income? How is IT avoided? Or are you just looking at the children?

poseidon1

OP I thought I would chime in here not to address your current query but to ask whether you are seeking validation and advice on various aspects of IHT planning and strategy, purely from the helpful forum contributors here?

Are we to understand that you have not taken 'paid for' professional tax advice at any point, and have solely relied on this forum and your own DIY research?

My concern is that from past posts they are number of things you are either doing or thinking of doing with regard to IHT mitigation, but with no clarity as to whether they are actually what you believe them to be.

For example in a post last year you indicate that you are planning to gift £20k per year out of surplus income to one of your daughters, for her to create a fund for her child's future school fees, but at the same have already been helping another daughter with actual school fees funding over the past 5 years for her child.

That sounds like an awful lot of ' surplus income' bearing in mind each spouse is considered separately for the purposes of the exemption ( no such thing as joint surplus income).

However in your 2024 post below, the bulk of your own 'surplus income' would seem to come from whatever level of sipp withdrawal you were prepared to take that would keep you within the 20% tax bracket,

https://forums.moneysavingexpert.com/discussion/6568274/gifting-from-income-and-what-is-classed-as-income

The danger here is what you consider to be surplus income each year may not actually be the case, and only discoverable post death.

Others here might disagree, but I am of the view that it could be sensible to obtain a professional overview from a tax accountant versed in IHT planning and compliance, of what you have already done and whether your assumptions of the affect of your actions were correct then and now.

There is only so far a forum like this can join the dots for you, based on information you are prepared to share on each separate occasion.

Triumph13

https://forums.moneysavingexpert.com/discussion/comment/82129818#Comment_82129818

As I said, it avoids the double whammy of having to pay both Income Tax AND IHT. Much better to just pay one lot of income tax in most cases.

Hal17

Thank you Poseidon1 for a very informative and helpful reply. The content in your post is very accurate to what I have been doing and I have not taken any professional tax or pension advice on my current actions.

I will add that it is both myself and my wife that have been using surplus income to help our son with earlier school fees which are now fully funded. The next stage is to help our daughter with future school fees for our young granddaughter.

We have both been fortunate over the last 5 years that our total annual income has been significantly greater than our annual expenditure, hence the reason we have been able to help with financial support.

These gifts have been made individually and are fully documented with detail reports and I am confident that we have followed the correct procedure in line with my own personal research.

As you kindly pointed out I have used and will continue to use the extremely helpful feedback you can receive from this forum, including the very helpful posts that you contribute to everyone.

I will certainly consider your suggestion about having a professional overview of what we have been doing, just to ensure we can continue the financial support going forward, knowing it meets IHT compliance. Thank you again for the extremely helpful post and I really appreciate the points that you highlighted as concerns.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82130603#Comment_82130603

Glad my observation was received in the spirit it was given.

The gifts out of surplus income IHT exemption has always been a somewhat problematical exemption, that has had to be updated and clarified as new income sources such as sipp drawdown and isa income have come on stream.

When combined with other exemptions such as PETs and the annual exempt it can be very effective in curbing estate growth for IHT purposes. However, navigating between the exemptions can be tricky at times, hence my suggestion for a one off professional review in your case.