death in service arrangements for university and medical staff to potentially save inheritance tax
Post on 01-Apr-2015
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DEATH IN SERVICE
Arrangements for university and medical staff
to potentially save Inheritance Tax
With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)
This sum will normally be paid to your spouse.
With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)
It would then form part of your spouse’s estate
bringing it into “the net” for Inheritance Tax and
Long Term Care “means testing”.
With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)
This sum will normally be paid to your spouse.
With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)
This sum will normally be paid to your spouse.
It would then form part of your spouse’s estatebringing it into “the net” for Inheritance Tax andLong Term Care “means testing”.
THE SOLUTION?
Establish a trust during your lifetime which is designed
specifically to receive the capital sum.
On your death, the capital sum is paidinto this trust which means that:
Establish a trust during your lifetime which is designed specifically to receive the capital sum.
It is not added to your spouse’s estate for inheritance Tax purposes
Establish a trust during your lifetime which is designed specifically to receive the capital sum.
On your death, the capital sum is paid into this trust which means that:
It will not be assessed as capital belonging to your spouse for the purposes of a long term care means test
Establish a trust during your lifetime which is designed specifically to receive the capital sum.
On your death, the capital sum is paid into this trust which means that:
It is not added to your spouse’s estate for inheritance Tax purposes
Your spouse still has access to and control of income and /or capital from the trust.
Establish a trust during your lifetime which is designed specifically to receive the capital sum.
On your death, the capital sum is paid into this trust which means that:
It is not added to your spouse’s estate for inheritance Tax purposes
It will not be assessed as capital belonging to your spouse for the purposes of a long term care means test
EXAMPLE IN PRACTICE
Inheritance Tax is not normally charged on gifts between spouses.This tax is charged when a person dies and transfers chargeable assets to persons other than the spouse in excess of a ‘Nil Rate Band’ currently £312,000 each.
So: £1,000,000 - £624,000 = £376,000 * 40% = £150,400
House/personal £ 650,000
Investments £ 150,000
Death in Service benefit
£ 200,000
Total Joint Estate £1M
Inheritance Tax £150,400
House/personal £ 650,000
Investments £ 150,000
Death in Service benefit: trust
£0
Total Joint Estate £800,000
Inheritance Tax £70,400
The trust removes the Death in Service lump sum from your estate; this means that:
£200,000 is removed at a tax rate of 40% giving a potential tax saving of £80,000.
Resulting in the potential Inheritance Tax being reduced to £70,400.
Death in Service
What will this cost me?…Nothing but a little time!
1. Time to complete the necessary documentation (University Superannuation Scheme and the National Health Service
Pension Scheme in Scotland and England have different procedures.)
2. Attach £10 note to give the trust ‘substance’ and
3. Copy the documents to your pension scheme with a specific covering letter.
FOR FURTHER INFORMATION CONTACT:Andrew WalkerSenior Partner
The St. James’s Place Partnership20 Carlton Place
Aberdeen AB15 4BQ
Telephone: 01 224 647 102Mobile: 07 900 284 729
Email: andrew.walker@sjpp.co.uk
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