Commentary

I4.125A The IHT implications of pensions on death

IHT, trusts and estates

I4.125A The IHT implications of pensions on death

I4.125A The IHT implications of pensions on death

This article discusses the IHT implications of death on certain qualifying pension schemes (referred to below as 'qualifying schemes'). For an outline of these schemes see I4.125.

For information on overseas pensions see I9.325.

Basic pension or annuity rights

A person entitled to a pension or annuity under a qualifying pension scheme is not treated as being beneficially entitled to the property in which the interest subsists1. It follows that since no part of the property in the fund is treated as part of the deceased's estate it cannot be charged to IHT on his death.

However, the right to the pension or annuity under a qualifying scheme is an asset forming part of the deceased's estate. Its value immediately before death will be nil, unless the pension or annuity continues after death (as to which see below). It is provided that the value of an interest which comes to an end on the death of a pensioner or annuitant will not form part of his estate immediately before his death2, and therefore no IHT will be payable. But this does not apply if the pension or annuity is an interest resulting (whether by virtue of the instrument establishing the fund or scheme or otherwise) from the application, for example by way of settlement, of any other benefit, for example a lump sum, available under the fund or scheme3. The reason for this presumably is that the settlement of the lump sum, even if its

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