death in service arrangements for university and medical staff to potentially save inheritance tax
TRANSCRIPT
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DEATH IN SERVICE
Arrangements for university and medical staff
to potentially save Inheritance Tax
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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)
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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)
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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.
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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”.
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THE SOLUTION?
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Establish a trust during your lifetime which is designed
specifically to receive the capital sum.
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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.
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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:
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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
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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
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EXAMPLE IN PRACTICE
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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
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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.
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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.
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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: [email protected]