This video discusses the tax-efficient benefits of using a pension plan for wealth transfer, particularly in the context of inheritance tax planning. It highlights that pension death benefits are typically exempt from inheritance tax, presenting a valuable opportunity for estate planning.
The video explains that in certain cases, it’s possible to pass on a pension plan to future generations, which can help reduce inheritance tax liabilities. This can be achieved by retaining wealth within tax-efficient pensions and using other assets, which may be subject to inheritance tax, for income or other purposes.
The treatment of pensions upon death depends on several factors. For defined contribution pensions, such as personal or stakeholder pension plans, beneficiaries can inherit the money in the pension plan. This is also true for most pensions in drawdown. However, the video cautions that not all pension plans are straightforward, and some may have an inheritance tax liability. Therefore, it’s crucial to understand the specific details of one’s pension plan and how it fits into their overall circumstances.
The video concludes with a recommendation to consult a qualified advisor to explore how pensions can be used to mitigate future inheritance tax liabilities. This should be part of a comprehensive plan that considers all aspects of an individual’s financial situation and goals.