Death in Service Trust - Save Inheritance Tax

1. DEATH IN SERVICE Arrangements for university and medical staff to potentially save Inheritance Tax

2. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed.

3. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. This sum will normally be paid to your spouse.

4. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. This sum will normally be paid to your spouse. It would then form part of your spouse’s estate bringing it into “the net” for Inheritance Tax and Long Term Care “means testing”.

5. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. This sum will normally be paid to your spouse. It would then form part of your spouse’s estate bringing it into “the net” for Inheritance Tax and Long Term Care “means testing”.

6. THE SOLUTION?

7. Establish a trust during your lifetime which is designed specifically to receive the capital sum.

8. 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:

9. 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

10. 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

11. 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 Your spouse still has access to and control of income and /or capital from the trust.

12. EXAMPLE IN PRACTICE

13. 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 £325,000 each. So: £1,000,000 - £650,000 = £350,000 * 40% = £140,000

14. 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 £60,000.

15. 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.

16. FOR FURTHER INFORMATION CONTACT:Andrew WalkerSenior PartnerThe St. James’s Place Partnership20 Carlton PlaceAberdeen AB15 4BQTelephone: 01 224 647 102Mobile: 07 900 284 729Email: andrew.walker@sjpp.co.uk