Upon death can a SIPP be transferred tax free.
Discussion
Hi All, Happy new year.
The wife and I are currently sorting mirror wills and have had a drafts written, not a simple one so there seems to be more questions than answers with the solicitor stating ask the relevant expert as in accountant, tax advisor, IFA etc.
I have suggested upon first death any SIPPs are inherited in equal shares to both our children but it must remain as or be invested in a SIPP in their own names.
First question is this possible?
What would be the immediate tax situation? I am assuming long term that inheritance tax will come into play should the survivor die within seven years.
The reason for doing this is I would like to leave them with something hopefully tax efficient but also in a way it can’t be wasted, the eldest is a bit of a loose cannon at the moment.
Also am I right in thinking that whoever is named in the SIPPs as beneficiaries could also overrule this should we change our minds in the future?
We are both early 50s if that is relevant.
Thanks. MD
The wife and I are currently sorting mirror wills and have had a drafts written, not a simple one so there seems to be more questions than answers with the solicitor stating ask the relevant expert as in accountant, tax advisor, IFA etc.
I have suggested upon first death any SIPPs are inherited in equal shares to both our children but it must remain as or be invested in a SIPP in their own names.
First question is this possible?
What would be the immediate tax situation? I am assuming long term that inheritance tax will come into play should the survivor die within seven years.
The reason for doing this is I would like to leave them with something hopefully tax efficient but also in a way it can’t be wasted, the eldest is a bit of a loose cannon at the moment.
Also am I right in thinking that whoever is named in the SIPPs as beneficiaries could also overrule this should we change our minds in the future?
We are both early 50s if that is relevant.
Thanks. MD
Your children would inherit your SIPP funds as Nominated Beneficiaries. Most (all?) SIPP providers then transfer them to a SIPP in the Nominated Beneficiaries own name. You cannot control how and when the Nominated Beneficiary accesses the funds.
If you die before age 75 the inherited funds are income tax free, after 75 and they are subject to income tax when withdrawn from the SIPP by the Nominated Beneficiary.
It is proposed that from April 2027 the value of your SIPP will be included in your estate for IHT assessment.
If you die before age 75 the inherited funds are income tax free, after 75 and they are subject to income tax when withdrawn from the SIPP by the Nominated Beneficiary.
It is proposed that from April 2027 the value of your SIPP will be included in your estate for IHT assessment.
Panamax said:
You're using the wrong solicitor. Find one who knows what they're doing.
There is some merit in this suggestion. Writing a will is a pretty straightforward process, DIYable even. Optimising it for tax or complicated routes of inheritance is what you may need advice for so if your solicitor cannot provide that advice they may not be providing much service at all. Regarding the SIPPs to the kids on first death, if both you and Mrs Dodge would be financially secure enough to not need each others SIPP then that’s fine but as suggested above, the tax benefits of doing this are a swiftly closing window so it will probably be pointless.
Passing the SIPP to each other would still give options for the surviving spouse to gift money to the kids if they felt it was then appropriate (the 7 year issue then starts to apply).
TownIdiot said:
The tax treatment of pensions is due to change in April 2027 to be brought into IHT consideration
Indeed.Maybe there are vulnerable offspring involved - if so, then it makes sense to try to ensure their safety after you pass away.
If not, I find it odd how people want to control things from behind the grave.
Sure, try to make things tax efficient, but with the proposed IHT changes looming, think of it all as part of the pot, to be shared for whatever purposes this feckless living survivors care to put it!
We are into simplifying our lives for our 60s & beyond, & used https://www.freewills.co.uk to do (re-do) ours earlier this year. Very easy process, we had our previous wills to check against (& they are solicitor-checked). As recommended by MSE Martin Lewis - scroll 1/3rd down here.
I’m sure that won’t suit the OP, given their ‘complexity’, but might help others. We have no business interests involved, & our offspring are working in good jobs. Consciously trying to share things more now to make their (& our!) lives more fun!
One thing to consider - If you were to die leaving a wife behind, the trustees of your SIPP would have to be satisfied that your wife didn't need some or all of your SIPP before agreeing to follow your nomination to have your SIPP split into two for the benefit of your children...
This would likely hinge on the age of your children at the time of your death.
And presumably, f you were to die when your children were still minors, they would not be able to receive anything directly from the SIPP as it would have to pass through some form of trust arrangement, but once they were 18+ they could in theory have full access to whatever was nominated to them (which will now be in a SIPP in their names) and they wont have to wait until they are 55>57+ etc. as they would have to do with their own SIPPs unless your will has created a new specific trust for that purpose.....
This would likely hinge on the age of your children at the time of your death.
And presumably, f you were to die when your children were still minors, they would not be able to receive anything directly from the SIPP as it would have to pass through some form of trust arrangement, but once they were 18+ they could in theory have full access to whatever was nominated to them (which will now be in a SIPP in their names) and they wont have to wait until they are 55>57+ etc. as they would have to do with their own SIPPs unless your will has created a new specific trust for that purpose.....
Hi guys, thanks for the info and opinions.
The “children “ are 17 & 19, the 19 year old is the issue at the moment as he will spend every penny he can get hold of with not much to show for it. But he is willing to work and do long hours, he is an apprentice plumber so has potential to earn an ok wage. We hope by the time the will is needed he would have grown up. The 17 year old is fine but will likely to be in education for sometime.
It seems there is no benefit in doing what was suggested so it looks that it can be put to bed.
It does seem we have chosen low quality solicitors, we took the easy option as we were at their offices for a minor conveyancing task. We we’re told we need more than a basic will as we needed property protection because of our home and BTLs, then tell us we need to take tax advice from an IFA.
We haven’t got a will so this at least puts something in place which will make the situation better in the short term if needed, (Hopefully not).
Happy new year.
The “children “ are 17 & 19, the 19 year old is the issue at the moment as he will spend every penny he can get hold of with not much to show for it. But he is willing to work and do long hours, he is an apprentice plumber so has potential to earn an ok wage. We hope by the time the will is needed he would have grown up. The 17 year old is fine but will likely to be in education for sometime.
It seems there is no benefit in doing what was suggested so it looks that it can be put to bed.
It does seem we have chosen low quality solicitors, we took the easy option as we were at their offices for a minor conveyancing task. We we’re told we need more than a basic will as we needed property protection because of our home and BTLs, then tell us we need to take tax advice from an IFA.
We haven’t got a will so this at least puts something in place which will make the situation better in the short term if needed, (Hopefully not).
Happy new year.
Hi guys, thanks for the info and opinions.
The “children “ are 17 & 19, the 19 year old is the issue at the moment as he will spend every penny he can get hold of with not much to show for it. But he is willing to work and do long hours, he is an apprentice plumber so has potential to earn an ok wage. We hope by the time the will is needed he would have grown up. The 17 year old is fine but will likely to be in education for sometime.
It seems there is no benefit in doing what was suggested so it looks that it can be put to bed.
It does seem we have chosen low quality solicitors, we took the easy option as we were at their offices for a minor conveyancing task. We we’re told we need more than a basic will as we needed property protection because of our home and BTLs, then tell us we need to take tax advice from an IFA.
We haven’t got a will so this at least puts something in place which will make the situation better in the short term if needed, (Hopefully not).
Happy new year.
The “children “ are 17 & 19, the 19 year old is the issue at the moment as he will spend every penny he can get hold of with not much to show for it. But he is willing to work and do long hours, he is an apprentice plumber so has potential to earn an ok wage. We hope by the time the will is needed he would have grown up. The 17 year old is fine but will likely to be in education for sometime.
It seems there is no benefit in doing what was suggested so it looks that it can be put to bed.
It does seem we have chosen low quality solicitors, we took the easy option as we were at their offices for a minor conveyancing task. We we’re told we need more than a basic will as we needed property protection because of our home and BTLs, then tell us we need to take tax advice from an IFA.
We haven’t got a will so this at least puts something in place which will make the situation better in the short term if needed, (Hopefully not).
Happy new year.
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