Do you worry about how to pass on your wealth to your loved ones without having to pay a lot of taxes?
If so, pensions can be a good way to tax-efficiently leave wealth to your family.
Inheritance Tax (IHT) is a tax that affects around 1 in 20 estates, and more people will need to consider it because of frozen IHT thresholds. If your estate is below the threshold, no IHT will be due. The value of your estate could increase over time due to inflation, so it’s important to think about IHT even if it doesn’t currently exceed the threshold.
What can I do to pass on my pension to my loved ones?
Money that remains in your pension isn’t considered part of your estate when calculating IHT. However, taxes may still be due when you pass away, depending on the age you pass away, your beneficiary’s other income, and how they access the savings. If you want to pass on your pension to your loved ones, you should manage your withdrawals and only withdraw the income you need from your pension. You should also talk to your potential beneficiary about how they’d use the money and complete an expression of wishes with each pension that you hold to state who you’d like to receive your pension savings.
Working with a financial planner can help ensure that your plan continues to reflect current rules. If you’d like to discuss what you can do to reduce a potential IHT bill or your options when accessing your pension, book a free, no-obligation chat here