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SIPP - outside estate
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- Lemon Slice
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SIPP - outside estate
I have a SIPP from which I’ve taken the TFLS and from which I’m now drawing down a modest amount each month. So, as I understand it, the SIPP is in “drawdown”. If I died tomorrow is the money in the pension pot (despite it being in drawdown) still outside my estate.
I have given the company (AJ Bell) an expression of wishes and understand that this is not binding on the trustees.
I’m just checking here that the fact I’ve taken the TFLS and put the fund into drawdown doesn’t make the fund itself part of my estate.
Thanks in advance.
Best wishes,
Steve
I have given the company (AJ Bell) an expression of wishes and understand that this is not binding on the trustees.
I’m just checking here that the fact I’ve taken the TFLS and put the fund into drawdown doesn’t make the fund itself part of my estate.
Thanks in advance.
Best wishes,
Steve
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- Lemon Quarter
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Re: SIPP - outside estate
Hi Steve
There's an article here illustrating where IHT may be charged https://www.pruadviser.co.uk/knowledge- ... -pensions/
Cheers, OLTB.
There's an article here illustrating where IHT may be charged https://www.pruadviser.co.uk/knowledge- ... -pensions/
Cheers, OLTB.
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Re: SIPP - outside estate
Steveam wrote:I have a SIPP from which I’ve taken the TFLS and from which I’m now drawing down a modest amount each month. So, as I understand it, the SIPP is in “drawdown”. If I died tomorrow is the money in the pension pot (despite it being in drawdown) still outside my estate.
I have given the company (AJ Bell) an expression of wishes and understand that this is not binding on the trustees.
I’m just checking here that the fact I’ve taken the TFLS and put the fund into drawdown doesn’t make the fund itself part of my estate.
Thanks in advance.
Best wishes,
Steve
The answer is yes, it will fall outside of your estate for IHT purposes. The article quoted by OLTB does not I think apply to a SIPP. The fact that A J Bell have accepted a Letter of Wishes from you indicates that they believe it falls outside of your estate as well. I am in exactly the same position as you and it was confirmed by Alliance (now of course II) that my SIPP does indeed fall outside of my estate.
Dod
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Re: SIPP - outside estate
ReallyVeryFoolish wrote:To be 100% transparent, the tax free lump sum that has been taken from the SIPP is no longer protected from inheritance tax.
RVF
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
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Re: SIPP - outside estate
and if you are really serious about tax planning, it is better to die before you reach 75 so that your SIPP can be taken free of any tax by whoever gets it. Though I suppose HMRC might regard that as tax avoidance/evasion these days?
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Re: SIPP - outside estate
scrumpyjack wrote:and if you are really serious about tax planning, it is better to die before you reach 75 so that your SIPP can be taken free of any tax by whoever gets it. Though I suppose HMRC might regard that as tax avoidance/evasion these days?
I have a friend whose husband did just that (died just short of 75 that is) She is not exactly a Merry Widow but was certainly comforted by that point as she fully expected to have to pay tax on withdrawals.
I doubt though that anyone would really recomend that for tax planning.
Dod
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Re: SIPP - outside estate
Dod101 wrote:ReallyVeryFoolish wrote:To be 100% transparent, the tax free lump sum that has been taken from the SIPP is no longer protected from inheritance tax.
RVF
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Re: SIPP - outside estate
Just coming up to 75 and regarding my wife with some suspicion.........
I did both ie expression of wishes with Alliance Trust Savings -Interactive Investor who took over Alliance Trust Savings wanted me to repeat these wishes-worth checking ie wanted all Alliance documentation reconfirmed
In my will stated the same fact to the trustees
xxd09
I did both ie expression of wishes with Alliance Trust Savings -Interactive Investor who took over Alliance Trust Savings wanted me to repeat these wishes-worth checking ie wanted all Alliance documentation reconfirmed
In my will stated the same fact to the trustees
xxd09
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Re: SIPP - outside estate
xxd09 wrote:Just coming up to 75 and regarding my wife with some suspicion.........
I did both ie expression of wishes with Alliance Trust Savings -Interactive Investor who took over Alliance Trust Savings wanted me to repeat these wishes-worth checking ie wanted all Alliance documentation reconfirmed
In my will stated the same fact to the trustees
xxd09
I'm really not sure it is a good idea to specify pension wishes in your Will. Legally your pension fund is not an asset to be disposed of in your Will.
IANAL but you might be giving potential grounds for a nasty tax inspector to argue it should be an asset subject to IHT because you have treated it as an asset of yours to be disposed of by the Will. Obviously if giving it to your spouse it won't make any difference!
Re: SIPP - outside estate
Apologies-did not specify SIPP in will as such
Probably should have expressed myself better by saying my wife and I have a will in place
xxd09
Probably should have expressed myself better by saying my wife and I have a will in place
xxd09
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Re: SIPP - outside estate
ursaminortaur wrote:Dod101 wrote:ReallyVeryFoolish wrote:To be 100% transparent, the tax free lump sum that has been taken from the SIPP is no longer protected from inheritance tax.
RVF
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Were I the beneficial owner the assets would not fall outside of my estate. The expression of wishes is not in order to 'bypass IHT'. Your estate will not usually pay IHT even without an expression of wishes letter; this simply guides the SIPP Trustees who may or may not abide by that expression. They usually will though but it is their discretion that counts. I think we are saying the same thing but I do not think that I could be called the beneficial owner of my SIPP in the same way that I am with an ISA except risking incurring IHT
Dod
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Re: SIPP - outside estate
Dod101 wrote:ursaminortaur wrote:Dod101 wrote:
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Were I the beneficial owner the assets would not fall outside of my estate. The expression of wishes is not in order to 'bypass IHT'. Your estate will not usually pay IHT even without an expression of wishes letter; this simply guides the SIPP Trustees who may or may not abide by that expression. They usually will though but it is their discretion that counts. I think we are saying the same thing but I do not think that I could be called the beneficial owner of my SIPP in the same way that I am with an ISA except risking incurring IHT
Dod
https://www.lawinsider.com/dictionary/sipp-member
SIPP Member means the individual who has beneficial ownership of the pension assets belonging to the SIPP in respect of whom the SIPP Trustee has opened the SIPP Dealing Account.
The fact that the pension is outside your estate when you die is down to the UK legislation covering pensions.
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Re: SIPP - outside estate
ursaminortaur wrote:Dod101 wrote:ursaminortaur wrote:
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Were I the beneficial owner the assets would not fall outside of my estate. The expression of wishes is not in order to 'bypass IHT'. Your estate will not usually pay IHT even without an expression of wishes letter; this simply guides the SIPP Trustees who may or may not abide by that expression. They usually will though but it is their discretion that counts. I think we are saying the same thing but I do not think that I could be called the beneficial owner of my SIPP in the same way that I am with an ISA except risking incurring IHT
Dod
https://www.lawinsider.com/dictionary/sipp-member
SIPP Member means the individual who has beneficial ownership of the pension assets belonging to the SIPP in respect of whom the SIPP Trustee has opened the SIPP Dealing Account.
The fact that the pension is outside your estate when you die is down to the UK legislation covering pensions.
Just to add
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/iht-pensions/
Section 43(2) of the 1984 Inheritance Act means that amongst other things pension and annuity arrangements are settlements for IHT purposes.
As settled property, this would ordinarily result in the normal IHT charges at the point of settlement, each 10 years and on exit. However, there are specific exemptions within the act so that these IHT charges do not apply to pension or annuity arrangements.
On the member's death the scheme / trustees have two years from the date they were reasonably aware of the member's death on which to pay out any death benefits. After this period the exemptions enjoyed by pension arrangements cease to apply and periodic and exit charges may apply.
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Re: SIPP - outside estate
ursaminortaur wrote:Dod101 wrote:ursaminortaur wrote:
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Were I the beneficial owner the assets would not fall outside of my estate. The expression of wishes is not in order to 'bypass IHT'. Your estate will not usually pay IHT even without an expression of wishes letter; this simply guides the SIPP Trustees who may or may not abide by that expression. They usually will though but it is their discretion that counts. I think we are saying the same thing but I do not think that I could be called the beneficial owner of my SIPP in the same way that I am with an ISA except risking incurring IHT
Dod
https://www.lawinsider.com/dictionary/sipp-member
SIPP Member means the individual who has beneficial ownership of the pension assets belonging to the SIPP in respect of whom the SIPP Trustee has opened the SIPP Dealing Account.
The fact that the pension is outside your estate when you die is down to the UK legislation covering pensions.
Yes I know that. So?
Dod
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Re: SIPP - outside estate
ursaminortaur wrote:Dod101 wrote:ReallyVeryFoolish wrote:To be 100% transparent, the tax free lump sum that has been taken from the SIPP is no longer protected from inheritance tax.
RVF
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Rereading this post, if the SIPP trustees were able to accept a binding instruction, that would mean that the SIPP was not independent of one's estate and thus IHT would apply. I think though that the SIPP being regarded as not within one's estate, ( that is, it falls under the pensions legislation) comes first, and then the letter of wishes follows on. A letter of wishes in itself does not confer freedom from IHT. Being the beneficiary and being the beneficial owner are two different things, a bit like any trust which is what I think a SIPP is. Anyway I think we are arguing about nothing in practical terms.
Dod
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Re: SIPP - outside estate
Dod101 wrote:ursaminortaur wrote:Dod101 wrote:
Were I the beneficial owner the assets would not fall outside of my estate. The expression of wishes is not in order to 'bypass IHT'. Your estate will not usually pay IHT even without an expression of wishes letter; this simply guides the SIPP Trustees who may or may not abide by that expression. They usually will though but it is their discretion that counts. I think we are saying the same thing but I do not think that I could be called the beneficial owner of my SIPP in the same way that I am with an ISA except risking incurring IHT
Dod
https://www.lawinsider.com/dictionary/sipp-member
SIPP Member means the individual who has beneficial ownership of the pension assets belonging to the SIPP in respect of whom the SIPP Trustee has opened the SIPP Dealing Account.
The fact that the pension is outside your estate when you die is down to the UK legislation covering pensions.
Yes I know that. So?
Dod
As it says in the definition a "SIPP Member means the individual who has beneficial ownership of the pension assets belonging to the SIPP". So as the SIPP member you are the beneficial owner.
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Re: SIPP - outside estate
Dod101 wrote:ursaminortaur wrote:Dod101 wrote:
That is interesting, was it ever? It had not occurred to me that it would be after it had left the shelter of my SIPP. Clearly, to me anyway, it would then form part of my taxable estate as ownership had been transferred from the SIPP managers to me. It is not and never has been like an ISA except that you can invest in a tax free environment. Might be worth emphasising that although we have beneficial ownership of ISA assets, that does not apply to most SIPPs which is why they do not form part of the estate for IHT.
Dod
Sorry that isn't true. You are the beneficial owner of the SIPP with the company providing the SIPP (or a legally separate subsiduary) usually being the trustee - a few providers also allow you to be a co-trusteee along with themselves. Indeed I believe the expression of wishes being able to bypass IHT depends upon having trustees who after your death have a degree of legal flexibility as to whether or not they comply with those wishes. If rather than an expression of wishes a binding instruction was made as to who to pay on your death then your pension would be considered part of your estate for IHT purposes.
Rereading this post, if the SIPP trustees were able to accept a binding instruction, that would mean that the SIPP was not independent of one's estate and thus IHT would apply. I think though that the SIPP being regarded as not within one's estate, ( that is, it falls under the pensions legislation) comes first, and then the letter of wishes follows on. A letter of wishes in itself does not confer freedom from IHT. Being the beneficiary and being the beneficial owner are two different things, a bit like any trust which is what I think a SIPP is. Anyway I think we are arguing about nothing in practical terms.
Dod
In trust terms the beneficial owners and beneficiaries are one and the same thing.
https://www.ciat.org/who-is-behind-all-this-the-beneficial-owner/?lang=en
BO was the term conceived in the United Kingdom with the configuration of the trust. It has been known since the 12th century when it was used in the Crusades[1], with the difference being established between “legal ownership” (trustee or fiduciary who administers properties for the benefit of others, the beneficiaries) and “beneficial ownership” (the beneficiaries of the trust).
Although the term BO is currently applied to a wide variety of situations other than the trusts, its essence which refers to the individual or human being who ultimately controls an asset and may benefit therefrom, continues to be the same.
Hence, although the term beneficiary isn't generally used in that context, whilst you are alive you could be referred to not just as the beneficial owner but also the beneficiary of your SIPP. Indeed if you were, after age 55, to drawdown all the money in your SIPP you would be the sole beneficiary.
With SIPPs and other pensions the term beneficiary though is more often used in respect of those who you wish to bequeath the pension assets to after you have died in a similar way to how you would refer to beneficiaries in a will.
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Re: SIPP - outside estate
I am getting a bit fed up of this pointless posturing. The fact is that for most holders of SIPPs , the SIPP assets are outside of their estate for IHT purposes. End of.
Dod
Dod
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Re: SIPP - outside estate
Snorvey wrote:Dod101 wrote:I am getting a bit fed up of this pointless posturing. The fact is that for most holders of SIPPs , the SIPP assets are outside of their estate for IHT purposes. End of.
....and if you take some or all of your tax free cash and stick it in the bank that is now inside your estate for IHT
If you take anything out of the SIPP, it's, er, not in the SIPP any more...
Scott.
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