A flexible approach
KEY POINTS
- Generally death benefits paid under registered pension plans are free of inheritance tax and are an effective tax planning tool.
- If benefits exceed the lifetime allowance there could be a 55% lifetime allowance charge on excess lump sum payments.
- The recipient of death benefits depends on whether the amounts are being paid as a lump sum or by way of a FAD account.
- Benefits paid to a bypass trust will be tax free if the scheme member dies aged under 75. No inheritance tax or income tax should apply to later capital payments made to a beneficiary.
- If the pension scheme member dies before 75 death benefits under both routes are free of income tax and inheritance tax.
- The relevant property rules...
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