The Lemon Fool

My OH and I both have SIPPs - as yet untouched. I understand that the SIPPs can be inherited by a beneficiary, subject to nomination by each of us and the SIPPs are outside IHT.

Does that mean the value of the SIPPs does not need to be included as an asset in the estate when our executors are completing the IHT forms for HMRC? If they do need to be reported, whereabouts is it either on the IHT400 or the IHT409?

Note - not planning to die any time soon, just trying to get an idea of how our executor would cope with this issue - he is a relative, not a professional.

Thanks
FelixC

Would the estate be likely be subject to IHT.

There is a £325k nil rate band and the possibility of taking that up to £1m if leaving the house to kids/grandkids if married.

It also depends on what age you die + or - 75

felixcanis wrote:My OH and I both have SIPPs - as yet untouched. I understand that the SIPPs can be inherited by a beneficiary, subject to nomination by each of us and the SIPPs are outside IHT.

Does that mean the value of the SIPPs does not need to be included as an asset in the estate when our executors are completing the IHT forms for HMRC? If they do need to be reported, whereabouts is it either on the IHT400 or the IHT409?

Note - not planning to die any time soon, just trying to get an idea of how our executor would cope with this issue - he is a relative, not a professional.

Yes, as far as I know your executor need have nothing to do with the SIPP at all. Its existence is not relevant to the will, probate, or to IHT (or its forms) in any way.

Basically the trustees of the SIPP give it to whomever they choose, with your "expression of wishes" used as a strong hint

They need to be informed of your decease - you might want your executor to cover that in case nobody else does.

Scott.

Gerry557 wrote:Would the estate be likely be subject to IHT.

There is a £325k nil rate band and the possibility of taking that up to £1m if leaving the house to kids/grandkids if married.

It also depends on what age you die + or - 75

Thanks for your reply - yes the estate would be subject to IHT - on the death of the last spouse. Even if the SIPPs are outwith the last estate, there would still be IHT due.

We have no kids. We would hope to reach 75, but who knows? I'll re-read through the pages on the SIPP providers site about the 75 at death info.

We will try to minimise the tax burden, and make the executors job as easy as possible, hence this enquiry.

FelixC

swill453 wrote:

felixcanis wrote:My OH and I both have SIPPs - as yet untouched. I understand that the SIPPs can be inherited by a beneficiary, subject to nomination by each of us and the SIPPs are outside IHT.

Does that mean the value of the SIPPs does not need to be included as an asset in the estate when our executors are completing the IHT forms for HMRC? If they do need to be reported, whereabouts is it either on the IHT400 or the IHT409?

Note - not planning to die any time soon, just trying to get an idea of how our executor would cope with this issue - he is a relative, not a professional.

Yes, as far as I know your executor need have nothing to do with the SIPP at all. Its existence is not relevant to the will, probate, or to IHT (or its forms) in any way.

Basically the trustees of the SIPP give it to whomever they choose, with your "expression of wishes" used as a strong hint

They need to be informed of your decease - you might want your executor to cover that in case nobody else does.

Scott.

Great, that's helpful. Spent all morning trying to find this answer on the HMRC site, wading through the IHT manual - not for the first time. The estates where we've acted as executors previously didn't have SIPPs, so I had the added joy of the HMRC Pension manual as well.

I'm putting together an updated crib sheet for our executor (only needed for the last death), so hopefully he won't have too hard a job.
Thanks for your reply
FelixC

picking up on one small part of these replies

I realise that the SIPP would be outside of estate for IHT..and that executors might give to whoever but should follow the expressed wishes

BUT if you die AFTER 75 the recipient is taxed on the 'gift' at his/hers going tax rate
(death before 75 is given tax free...AT PRESENT)

so if nobody is required to declare re the IHT issue...is it down to the recipiemt to declare the tax issue if he receives an 'after 75' benefit

mutantpoodle wrote:so if nobody is required to declare re the IHT issue...is it down to the recipiemt to declare the tax issue if he receives an 'after 75' benefit

Income Tax by self-assessment, yes.

Scott.

swill453 wrote:

mutantpoodle wrote:so if nobody is required to declare re the IHT issue...is it down to the recipiemt to declare the tax issue if he receives an 'after 75' benefit

Income Tax by self-assessment, yes.

Scott.

The SIPP administrator will deduct income tax from any amounts paid out.

Think there's some errors here. You're executor or solicitor should complete an IHT409 for each pension where your beneficiary is getting a lump sum death benefit. That's what hmrc used to decide if taxable or not.

Adamski wrote:Think there's some errors here. You're executor or solicitor should complete an IHT409 for each pension where your beneficiary is getting a lump sum death benefit. That's what hmrc used to decide if taxable or not.

Yes you could well be right. While I was pretty sure pensions don't count as assets of the estate, it seems HMRC like to be informed.

Scott.

I would be tempted to keep the last 7 years of bank statements and aid the executor by listing any gifts, charity and possibly proof of normal expenses if paying out to others from surplus income.

Bit of an auxiliary question.

If you are the named beneficiary of an expression of wish and the pension trustees honour the wish, after you receive the pension and it is in your name, are you allowed to withdraw it all and spend it?
If you do that, will it become taxable in any way?

The reason I ask is that most of my transferable wealth is in my SIPP. I have written the expression of wish so that my 2 children receive 12.5% of it each to buy a house. The remainder goes to Mrs. A. Google searching indicates that the recipient is at liberty to withdraw and spend how they chose, but the taxation situation is very vaguely discussed.

airbus330 wrote:Bit of an auxiliary question.

If you are the named beneficiary of an expression of wish and the pension trustees honour the wish, after you receive the pension and it is in your name, are you allowed to withdraw it all and spend it?
If you do that, will it become taxable in any way?

The reason I ask is that most of my transferable wealth is in my SIPP. I have written the expression of wish so that my 2 children receive 12.5% of it each to buy a house. The remainder goes to Mrs. A. Google searching indicates that the recipient is at liberty to withdraw and spend how they chose, but the taxation situation is very vaguely discussed.

If you die before attaining the age of 75, and the SIPP is passed on in accordance with the expression of wishes, the beneficiary can take the cash tax free and do what they like with it. If you die after age 75, then the beneficiary needs to pay tax at their marginal income tax rate.

Dod

airbus330 wrote:Bit of an auxiliary question.

If you are the named beneficiary of an expression of wish and the pension trustees honour the wish, after you receive the pension and it is in your name, are you allowed to withdraw it all and spend it?
If you do that, will it become taxable in any way?

The reason I ask is that most of my transferable wealth is in my SIPP. I have written the expression of wish so that my 2 children receive 12.5% of it each to buy a house. The remainder goes to Mrs. A. Google searching indicates that the recipient is at liberty to withdraw and spend how they chose, but the taxation situation is very vaguely discussed.

The answer is yes subject to the tax situation as outlined by mutantpoodle.

Dod

Dod101 wrote:

airbus330 wrote:Bit of an auxiliary question.

If you are the named beneficiary of an expression of wish and the pension trustees honour the wish, after you receive the pension and it is in your name, are you allowed to withdraw it all and spend it?
If you do that, will it become taxable in any way?

The reason I ask is that most of my transferable wealth is in my SIPP. I have written the expression of wish so that my 2 children receive 12.5% of it each to buy a house. The remainder goes to Mrs. A. Google searching indicates that the recipient is at liberty to withdraw and spend how they chose, but the taxation situation is very vaguely discussed.

The answer is yes subject to the tax situation as outlined by mutantpoodle.

Dod

Thanks Dod for the clear explanation