An interesting question has been raised that I don’t know the answer to. Can anyone help?
Where death benefits from a pension account, for someone over 75 are nominated to a discretionary trust, the death benefits suffer the trustee tax charge of 45%.
Where the beneficiary is a disabled or vulnerable person, can the pension member direct the death benefits to a disabled persons trust upon death and enable the beneficiary to benefit from the advantageous tax treatment?
Thank you
It will depend upon the terms of the Pension trust, in my experience many only allow a trust to be created until a minor attains age 18 (if at all).
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals
The 45% special lump sum death benefits charge applies where the payment is made to someone other than an individual (*). As such, it would apply if the money was paid to the trustee of a disabled persons trust. So while there may be subsequent tax benefits of the money being paid into a disabled persons trust, it won’t change the 45% income tax on the lump sum.
The (*) is because it also applies if it paid to an individual in a representative capacity, e.g. an individual in their capacity as a trustee (other than as trustee of a bare trust).